Life after work

Are you mentally ready for retirement?

02 February 2017

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Money & Life team

Money & Life contributors draw on their diverse range of experience to present you with insights and guidance that will help you manage your financial wellbeing, achieve your lifestyle goals and plan for your financial future.

The first thing on most peoples’ minds when they think of retirement is: “When can I afford it?” and “How much money will I need?”

But the question often not considered is: “Am I mentally ready for retirement?” Financial planners often bring this to the attention of their pre-retirement clients so they can help them make the transition.

Chris Giaouris, CFP® and principal advisor at Chronos Private says the main points to remember are:

  1. “You are who you are” and this doesn’t change because you retire
  2. The definition of retirement differs from person to person so focus on what retirement means for you
  3. Working, for most people, is a significant component of their lives, so that time will be free
  4. You may need to change your approach to day-to-day money management. While working we become accustomed to building wealth but in retirement it can be the opposite
  5. While this may be your first (and only) time retiring, millions have gone through something similar so there are some simple “do’s and don’ts”.

Mental preparation around retirement lifestyle

Retirement usually means a major lifestyle change. Giaouris says: “For most Australians, retirement is built up to be a significant life event and rightly so, as not everyone is able to retire when they would like. However, retirement should be as simple as doing whatever it is you want to do on any given day. This may involve travel, more time with loved ones or simply sleeping in!

Giaouris says he reminds clients of this exact point well before retirement as the so-called “rules” of retirement are changing. “For example, if you asked any passionate business owner what they would choose to do each day they would, for the most part say they would want to be working on their business,” he says. “Does this mean they are now retired? Or semi-retired?”

Do I qualify for Centrelink benefits?

New Centrelink rules came into effect in January 2017. Changes were made to the assets test that the Department of Human Services uses to calculate pensions. The rebalance of the assets test may affect your entitlement to a payment or the amount of that payment. Check out the assets test estimator on the Department of Human Services website.

Do I have enough income for retirement?

As mentioned earlier, the first thing on most peoples’ minds when nearing retirement is how much money they will need. But, other considerations include:

  1. How much income do you really need? Many are used to a budget based on a salary, but this doesn’t always translate perfectly into retired life. It may need to be revised up or down
  2. As a self-funded or partially self-funded retiree, your investments become a critical component in ensuring you can continue to do the things which make you happy. The way you invested your retirement savings in your 50s or 60s may no longer be appropriate
  3. If retirement comes with a sea change then give some thought to bringing this forward to when you are still working. This will allow you to adapt and give you peace of mind knowing that you still have an income as you adjust to a new lifestyle.

Considerations for a happy retirement

You’ve got to have friends

For many people, shared experiences are often more enjoyable than solitary ones. So it’s good to work on making new friends and keeping the old ones so you aren’t left feeling lonely when it does come time to retire.

Take a test drive

Retirement is usually pretty final, so it doesn’t hurt to try a “pretend-retirement” beforehand, by taking an extended break, for example a few months as opposed to a two-week holiday.

How’s your relationship?

Giaouris asks his clients: “Is the relationship with your spouse ready for either of your respective retirements?”

As you approach retirement it’s critical you reassess your individual goals with your spouse as this often gets neglected. During a 30-year marriage these will have changed significantly to when you first got married.

You may have married “for better or for worse” but if you don’t consider how retirement will affect your relationship there may be “rocks ahead”.

Contributor: Chris Giaouris, Principal Advisor, Chronos Private, AFSL 247429, through Fitzpatricks Private Wealth Pty Ltd.