Your emotional portfolio — the best guide to retirement
27 February, 2015
I work in the financial services sector so I am more guilty than most of squeezing the life out of the concept of retirement When asked about retirement, I launch into the lecture about needing to save more to have an acceptable lifestyle and not outlive our savings.
Having given some thought to retirement lately (for my clients, not for me just yet!), I am determined to change my approach and, in so doing, encourage others to think about retirement in a non-threatening and optimistic way.
The thing is, we can talk until we're blue in the face about how much we need to save and how many years our savings will last, but to a large extent these things will be what they will be There's no point in telling someone they are going to need $1 million dollars to give them an adequate retirement income if they're going to struggle to save even half that.
It's wrong to confidently predict that a person's savings will give them 15 years of happy retirement living because we know that, if any one of the many assumptions behind that prediction changes, they could get 20 years of happy living or they could get just 10...
Most people don't need to be told what steps to take in order to have a "good" retirement. In terms of retirement finances, they either need to save more, start saving earlier or stay working for longer. Each of these actions will result in a higher retirement income.
Rather than scaring people into saving so they approach retirement with trepidation, I think there is merit in helping people positively visualize and prepare for that phase in their lives that arrives when they stop working.
Instead of focusing on one's financial portfolio, it can be better to think about one's emotional portfolio in retirement. What is going to make me happy and fulfilled in retirement? What interests and activities are going to fill the gap left by no longer working? What relationships are going to fill the gap when I no longer see my work colleagues each day? What is my typical week or month going to look like in terms of what I'll do, what I might spend my money on and how I'll interact with my spouse or partner?
Some of the anxiety associated with retirement exists because the notion of retirement has changed in the last decade or so; we don't have any cultural signposts to point out what it's going to be like Just 30 years ago, most people relied on superannuation and didn't have to plan or deal with their own retirement savings. They also didn't live as long in retirement.
It is no wonder retirement has had negative connotations — it wasn't so long ago it was the relatively short period between finishing work and passing away. It was often characterized by poor health, loneliness and anxiety.
Nowadays, most 60-65 year olds are fit, healthy, active and energetic and quite unlike their parents and grandparents at the same age Today's retirees might have 20 years or more to enjoy and they might have the physical, emotional and (with the right advice) financial wherewithal to make retirement a truly golden phase of their lives.
If people took the time and effort to really visualize what retirement might look like for them, they would naturally pay more attention to their finances — in a good way, rather than being scared into it.
If I know, at 65, I will be facing a couple of decades to do whatever I want with my time, and I will be fit and healthy and still young in my attitude, I will want to start ferreting some money away now because I'll want to make the most of those future years. I'll save more because I'll be excited about the future, rather than afraid of it.
We need to change the retirement narrative Our retirement years could be our best years. If we sow the seeds now (emotionally and financially), our retirement harvest may be bountiful indeed.