Why smart retirement planning is about more than money

Most of us know someone who has struggled mentally soon after clocking off for the last time. When your purpose, routine and social network are intertwined with your career, it can be daunting to make the transition from employee to retiree.

While clichéd portrayals abound of retirement as an endless summer of beach walks, golf and overseas travel, the reality rarely lives up to the hype. Glossy brochures sell visions of sailing into the sunset but the truth is that you are heading into uncharted waters.

The less thought you have given to how you will structure your days, the activities you will pursue and your purpose in retirement, the higher the probability you will find yourself ‘stuck’ between your old identity and an unwritten future of possibilities.

In a March 2019 interview with Emma Plumb of Respectful Exits, American author Chip Conley neatly captured this dilemma.

“Our current process of retirement,” he argues, “doesn’t serve either the company or the older employee. To be a 100 percent employee on a Friday and a 100 percent retiree (0 percent employee) on Monday is cruel and unusual punishment and may accelerate poor health conditions since so much of our social life comes from the workplace.”

It is easy to forget that the idea of retirement at age 65 only came about in Australia in the early 1900s when the Age Pension was introduced. At the time, only a very small percentage of the population lived into their 70s and 80s, so planning for this phase of life was not a high priority. Statistically, you were lucky to make it to 65 and any time beyond that was a bonus.

But over the past century or so, we have added more than 25 years to our average life expectancy, a gift bestowed upon us by medical and technological advances and rising standards of living.

Health permitting, the challenge is to make the most of these extra years, but that is easier said than done. In 2017, the Australian Bureau of Statistics found that of those retirees who recently returned to the workforce, nearly one-third did so simply out of ‘boredom’ and because they ‘needed something to do’.

It seems the way you plan for retirement, and the period over which you make the transition, may well determine the quality of your experience in the decades that follow.

If we accept the adage that ‘money can’t buy happiness’, then you do yourself a disservice by preparing for retirement by only addressing your financial needs. While it is essential to do the numbers to ensure you can replace your salary with enough passive income when your salary stops, it is only one piece of the retirement planning puzzle. There are additional considerations that require thought and planning that have nothing to do with money.

While there are probably elements of work you will be glad to leave behind, there are several things your job (or business) provides that you may miss when you retire:

• Meaning and purpose You could easily define your purpose during your career. How will your purpose in life change from here?
• Routine For many years during your career, you knew where you would be every Monday morning. How will you create a new routine based on how busy or idle you want to be?
• Identity You had a job title and felt you were needed. To what extent were your job and your sense of self-worth intertwined?
• Social connection You had colleagues you could relate to and you would see them every day. How will you ensure opportunities for social interaction occur as easily in retirement?
• Achievement You enjoyed the satisfaction of completing a task or project. What new projects will you take on, and what goals might you set that are meaningful to you?

We are all different, but at each life stage, the presence of these elements contributes to our mental wellbeing. By acknowledging this, and consciously planning to replace these things in your regular activities, rather than spending those precious early years going around in circles, you are more likely to enjoy an easier and more fulfilling path to retirement.

While many people navigate their retirement transition well, some find the early stages of life after work mentally tough. Research by Beyond Blue suggests that between 10 and 15 per cent of Australians aged over 65 experience depression and this figure is reported to rise as high as 50 per cent among those living in residential aged care.

Psychologist, author and CEO of The Happiness Institute, Dr Tim Sharp attributes mental health challenges facing retirees to loneliness and fewer opportunities for social interaction.

“As well as all the usual causes of and contributors to depression, there are also some especially concerning ones for older people, none more worrying than isolation and loneliness,” he says. “Just as good quality relationships are vital for our health and happiness, a lack of these is increasingly being viewed as one of the major health issues for our future with an ageing population.”

Research by Dr Sarah Olesen and Associate Professor Peter Butterworth from the Centre for Research on Ageing, Health and Wellbeing at the ANU supports this view. In a 2012 article for The Conversation, they emphasise the importance of social interaction and a sense of community for boosting mental wellbeing in retirement.

“Older adults who are engaged in their communities and spend more time with family and friends have better mental health than others,” the authors say. “And this is particularly true for retirees, as community participation has added meaning and importance to one’s mental health once paid work has finished.”

Olesen and Butterworth go on to suggest that another way to increase your chances of a smooth retirement transition is to treat it as a process, rather than a point in time: “Part or gradual retirement (rather than full departure from the workforce) may ease the stress associated with leaving the workforce”.

This idea that you reduce your working hours in some way in order to make room in your life for other activities is increasing in popularity. Managed well, ‘phased retirement’ has advantages for employers and workers, and it is becoming more common for people to manage the adjustment to retirement by shifting to part-time work in their sixties, which may last for several years before stopping work completely.

And if we think about retirement as an exercise in ‘change’, staging the transition over time can be a very healthy way to progress from one phase of life to the next.

This is an edited extract from the forthcoming book, Finding Joy in Retirement, co-authored by Jon Glass PhD, director at 64 PLUS, and David Kennedy, retirement planning specialist and author of End of the Retirement Age. Finding Joy in Retirement is due to be published on August 1, 2019 at the RRP $29.95. You can learn more about David Kennedy’s books here.

Are you worried about heading into the uncharted waters of retirement? Do you have a plan to help you transition into your new phase of life?

IMPORTANT LEGAL INFO This article is of a general nature and FYI only, because it doesn’t take into account your financial or legal situation, objectives or needs. That means it’s not financial product or legal advice and shouldn’t be relied upon as if it is. Before making a financial or legal decision, you should work out if the info is appropriate for your situation and get independent, licensed financial services or legal advice.