Retirement Issues Are Not Always About The Money
Retirement planning is more than about the money. As an economist, friends will sometimes ask me about how to figure out if they have enough money to retire comfortably. But often the biggest issue is not money, but what they will do with their lives.
The money side is straightforward. A good financial planner can do the math and estimate the likelihood that a person or couple can retire at their standard of living, given their retirement income and investments. People who don’t want a financial planner to manage their investments can find a planner who charges on an hourly basis or fixed bid.
Sometimes people who seem doubtful about the money may actually be worried about something else: boredom. Many retirees lead interesting lives, but a fair number are bored a significant amount of time. Some have few social connections. Yet still others enjoy life more than ever.
In addition to a financial plan, retirement preparation should include a personal plan. People with hobbies and activities before retirement can transition more easily than workaholics with few interests beyond their jobs. This bears consideration before retirement.
Humans are social creatures, and engaging in activities and conversations with others is vital, at least for most people, in satisfying lives.
With personal plans for time and socializing in place, those considering retirement should circle back to their financial plans. If one envisions travel in retirement, the cost of the travel should be part of the financial plan. Personal and social plans must be evaluated in terms of their budgetary requirements.
Some occupations mostly end cold turkey, with an abrupt transition between working and not working. Other occupations, though, are easy to taper down. Attorneys, accountants, consultants and many other occupations lend themselves to part-time work for experienced people. Corporate and government employees sometimes have more difficulty with this approach, depending on how retirement benefits are calculated. Decisions must be made with a full understanding of the employer’s benefit plan, if any.
Planning is valuable but far from perfect. On the financial side, expenses may be higher than expected or secondary income sources may dry up. On the personal side, the hobby that occupied a few hours a week may become tedious if too much time is allocated to it. Physical frailty may limit activities and cost more than expected. Socially, gathering for coffee with the old crowd may get boring without the stimulus of new activity. Contingency plans will help. In the business world, contingency plans have two important advantages. First, plans made in a relaxed atmosphere tend to be better than plans developed in a panic. Second, people with contingency plans tend to execute the plan faster than someone considering them for the first time.
The non-financial side of retirement planning is just as important as the money. Having something interesting to do, and interesting people to talk to, is vital to life satisfaction. And basic business planning techniques can be applied to develop a resilient plan.
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