Retiring is Harder Than it Looks

A study released recently by RBC pointed to three myths about retirement for Canadians.  Essentially, they are as follows:

1. Retirees think they will know their retirement date more than a year in advance, but more often they don’t.
2. Lots of potential retirees think they are going to become snowbirds, heading south for the winter, but in fact, very few do. 
3. Retirees think they are going to continue working in retirement, but that’s usually not the case.

Interesting observations indeed.  But I was surprised that this study left out perhaps the most significant and troubling observation that I have noticed in my 24 years or so of helping people make the important transition into retirement and that is this: It’s likely going to be a lot harder than it appears.  

This isn’t universal.  Some in fact transition into complete retirement with remarkable ease making it not only look trouble free but in fact like the best thing that’s ever happened to them.  But, there is a significant number (sorry, I have compiled no stats on this it is purely anecdotal) who make retiring look something like being hauled off to prison.     

If you are within a few years of retirement, or recently retired, you will know which side of this issue you fall on.  And so those who are dreading retirement, or are living with someone who is, I direct my forthcoming comments to you.   

1. Here’s the big fear.  Your last year of working and your first year of retirement are going to look remarkably the same – except in retirement you won’t have a paycheque, you won’t have the satisfaction that comes from contributing to something bigger than you, and you will lose some important people in your social circle.  Here’s my sobering observation.  This is often remarkably accurate.   But, you can do something about that, other than the obvious “don’t retire.”  I recommend that you plan for the first year of retirement to be something special.   Take a world cruise.  Live in a villa in France for two months.  Take your children and grandchildren to Hawaii.   Blow the budget completely.  Admittedly, this is hard, very hard, to do – see tip number two.
2. It will be difficult to convince you to act on tip number one because of the “blow the budget” part of that idea.  For all your working life you have been spending someone else’s money.  It comes to you every month in the form of your paycheque.  In retirement, every dollar you will spend  (aside from the sadly small amount coming from CPP or OAS) is your money.   You might think this won’t matter.   It will.  Your subconscious mind will scream at you every time you want to spend a nickel on anything that isn’t absolutely necessary.   The best way to overcome this is to have a plan.  Prepare a budget with a really big spend on your blow out first year and weave this into a financial plan.  Crash test the plan against your worst fears (low market returns, higher than expected inflation, long lifespan) and prove to yourself that it works.  Your subconscious mind will take note.  Now execute the plan.  
3. The fact that we don’t know our retirement date in advance is probably a function of a bunch of things.  Things like health, the increasing potential to getting turfed as you become less valuable, and the fact that we keep moving the date to feel more secure.  Here’s my advice.   Set two dates.  First is a date you intend to be ready to retire from a financial perspective – the date at which “you will have enough.”  If the axe falls or your health fails after that date, you are good to go (financially at least).  Then set a date (just a few years later) at which you intend to actually pull the plug.   If you make it to the second date, you can retire knowing you have more than enough.  
4. Often when we face the major transition of retirement we have already just been through another significant change – transitioning out of the role as parent.  Yes, we may have replaced this with the role of grandparent and that can be most fulfilling.   But the point to make here is that after years of having a number of people at the dinner table every night, we will find ourselves with just our spouse, and we may need to get familiar again with that dynamic and maybe that person.  The hard reality to face for most couples is that they rarely, if ever talk about their retirement dreams with each other.  From my experience (both observing and living) life is so much better when it is shared with the person you love.  Retirement can afford you the time to do things you may not have even dreamed were possible.  If you have someone whom you hope will do those things with you, start talking about that now and find a way to incorporate each other’s dreams into your own.   Doing so, will make the retirement transition something to look forward to.  
5. Almost without exception those who are not looking forward to retirement will provide the same reason: “I don’t know what I will do with my time.”  I am certain that this isn’t always the real reason, but it may sound a lot better than the truth.  Nonetheless, filling our days is often a real concern, and to that I can only say, “that’s crazy.” (Although in truth, I never accuse my clients of being crazy).  There are a million things that can occupy one’s time.  But your first day of not going to work is not the time to start planning this.  The most successful transitions are those in which people want to retire to devote more time to other things.  The list of other things is too long to even attempt here.  But, If your work consumes the majority of your time you probably have a number of things going wrong and one of them is that you are blocking any hope you have of making a positive transition into retirement.  Start looking now for that elusive balance that we all dream about.  It’s worth the time you will devote to it.    

Planning for the future – however distant that might be – always boils down to a couple of simple principles.  First, create a vision of how you want that future to look.   Next, make sure that everything you do moves you towards that vision.  If you follow these two steps, your dreams are coming true and retirement will be welcomed with a smile.  

Bill