The Realities of Retirement

Retirement is often imagined as a permanent vacation that's been earned over many years of hard work and sacrifice. You envision yourself traveling the world on cruises, playing endless rounds of golf or pickleball, and telling yourself that you'll finally spend more time with your family and start exercising more. And while these dreams can certainly be part of your retirement, it's essential to understand that this is just one side of the coin.

Welcome to the Retired-ish podcast, where we normally discuss many of the financial planning aspects of retirement and try to help you understand how to make good financial decisions and sift through the noise that the financial world heaves at us every day. I'm your host, Cameron Valadez. Today, we're gonna talk about something a little different, but it is so, so important when it comes to planning for retirement. And that is what life can really be like when you hang up your work boots, you walk out of that office for good, or you decide to pass your business on to the next generation. Retirement is often dreamed up as a phase in life of pure relaxation and freedom like it's some sort of reward for all those years of work.

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But there are layers to this phase of life that many don't realize until they're in it. Today, I want to get real about the joys and the challenges that come with retirement. Now, I just want to throw out there that I'm not really a fan of the term retirement, at least the definition, and not in the traditional sense, because retirement thirty years ago looked much different than it does today.

And I think the meaning of retirement has changed as well. And that's not only from a financial standpoint but from a lifestyle standpoint. It's likely that your parents, for example, may have worked until the earliest age that they could start receiving Social Security benefits or the age that they could take their pension that might have been offered by their longtime employer. And this was because in order to survive financially in retirement, they had to reach these milestones first. That still is true for many people out there.

But in today's world, with the way things have changed over the past couple of decades, particularly with technology and innovation, age demographics, and the fact that many private pensions have gone away, the whole idea of retirement can be a bit more flexible. If you have saved on your own without relying fully on something like Social Security or a pension, or you've been fortunate enough to receive some sort of inheritance from your parents, you may have the chance to leave the workforce sooner than expected based on your financial situation.

But the real question I want to pose today is, should you? Because there's much more than just the finances when deciding to stop working completely and “retire.” I'm a huge believer that retirement doesn't have to be a means to an end, and that's actually why this very show is called Retired-ish. To be Retired-ish means to have the confidence and freedom to spend the valuable time you have remaining on what matters most since you're only getting less of it. It has nothing to do with physically never waking up and going to work or deciding to stop taking a paycheck. It's more of a lifestyle choice. Retirement doesn't necessarily mean that the traditional form of work is done.

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Instead, it can mean that ”work” takes a back seat to other important things in your life. In other words, your priorities will shift due to having less time at this stage of your life. So if you find a sense of purpose in life by continuing to work in some capacity, whether or not you need to financially, you are what I would call Retired-ish. The traditional retirement is really just a made-up thing in our culture. A term used to identify a phase of life for most people, but it actually doesn't promise or contain anything other than less time out of your day being taken by the rest of the world for a paycheck. So it's totally up to you to maximize that newfound time with things that you find most important in life and value the most. But there's one really big caveat. If you don't intentionally plan for and fill that available time, other things will make their way into it and take up that priceless time that you have left. The danger is that if you don't understand this and you assume your “retirement years” will be full of nothing but good times and positive emotions, it is exactly why many people mentally struggle with the transition. And, again, this part has nothing to do with the money.

Okay. So, let's talk about the dream versus the reality. Retirement is often imagined as a permanent vacation. You envision yourself traveling the world on cruise ships, playing endless rounds of golf or pickleball, or telling yourself that you'll finally spend more of your time with your family and start exercising more. And while these dreams can certainly be part of your retirement, it's essential to understand that this is just one side of the coin. Many retirees, unfortunately, find that the initial, call it the honeymoon phase, where everything feels new and exciting, eventually fades. The reality sets in that this is your new everyday life, and it requires a significant adjustment.

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The structure that a job provides or a career provides is suddenly gone, and with it, a sense of purpose and day-to-day routine. There are no more emails to wake up to and people relying on you to help them. Even though it's not true, it can almost feel like you're not important to the world anymore. It's sort of like a teeter-totter. You may gain more time and freedom, but you may also lose social connections, a sense of direction, mental stimulus, and potentially some physical activity. You might say to yourself, yeah. Right. I'm not gonna miss doing x y z tasks at work every day.

But what you may not realize is that each time you did an x y z task, you actually got a sense of accomplishment and some sort of mental stimulus. And I don't mean to be a Debbie Downer here. It's not all doom and gloom, and that you won't be able to replace those feelings and stimuli. It's just that you need to make sure you know what you're going to be doing in retirement ahead of time to fill that void. Rather than waiting until after you've retired to test that out by doing these new things, it's better to start integrating those new routines beforehand. That way, you know how it feels, and you know that these new things can, in fact, fill that void.

As an example, remember, without any intention about how you're gonna fill your time, other things will definitely fill it for you, which might be something like sitting around and watching TV or YouTube all day. Now that something rather unproductive has taken that time, you may find it harder than expected to get to go exercise and better your health, for example. And if you get stuck in that cycle, all of the things you promised yourself you were going to do in your retirement years don't actually happen or materialize, and the things that take their place can actually lead to deteriorating mental and physical health, which is definitely not the ideal retirement you envisioned.

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Now, this leads me to one of the most surprising aspects of retirement, which is the emotional changes and roller coaster that one might go through. It's very common for retirees to experience both more frequent and a wide spectrum of feelings in the initial few years, from joy and serenity to anxiety and, in some cases, depression. One of the main contributors is that many retirees struggle with a loss of identity. Your career or your job often defines who you are, and without it, you might feel sort of adrift.

Finding new ways to define yourself and your worth can be challenging, but it is crucial for your mental well-being moving forward. These emotional changes simply from the transition into retirement will likely be much more frequent than any negative emotions you might get that stem from finances, such as drastic investment portfolio losses or economic downturns, for example. Again, it's not just about the money. Now, these gut-wrenching downturns have happened plenty of times in the past, and you likely have lived through one or more of them. And believe it or not, they will continue to happen even while you're in retirement, but they will likely be much less frequent compared to the emotions you might face each day when trying to wisely fill that precious time that we discussed earlier.

Another significant change is in social interactions. While working, you have daily contact with colleagues, which provides a sort of a built-in social network. Now, in retirement, this network can shrink rapidly, leading to feelings of isolation and even loneliness. The point is that it doesn't have to. You can and should plan to build a new social circle, but know that this takes effort. Joining clubs, volunteering, picking up a physical activity or sport, or even taking classes can provide opportunities to meet new people and form new meaningful connections. Finding a new purpose is one of the most rewarding things you can do in retirement, and this might be through volunteering, mentoring, or even pursuing some sort of passion project.

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The key is to stay engaged and continue to challenge yourself. And this lack of social connections isn't limited to just colleagues either. This can certainly be close friends or even family. So, for example, you may say that you intend to spend more time reconnecting with friends and family throughout your retirement. But simply because you now have time for this doesn't mean these relationships will rekindle the way you once thought. Your sacrifices with your time during the years before retirement can sometimes create a kind of collateral damage that won't just go away because you now have more free time. And this is usually caused when people are committed deeply to their career and their work, and it's their entire identity. If this sounds like you, just be aware that this, too, might take some work. And although we talk about the topic of financial planning or retirement planning in nearly every episode of the Retired-ish podcast, I think it's still important to mention since this is a frequently procrastinated aspect of retirement, and even the best-laid plans can encounter unexpected hurdles. So, your plans need to be dynamic. You need to have the flexibility to adjust along the way.

Things like health care costs, inflation, and changes in the markets and economy can impact your retirement savings dramatically. For example, don't make the mistake of saying if I could just save $1,000,000 by the time I want to retire, I will be fine since I can live off just 4% of my investments each year. Well, what happens if, in the first year or two of retirement, your investments drop by 40% in value? Now what? What happens when your adult child needs significant financial help to get out of a bad situation or your spouse dies prematurely? What happens when you suddenly need to start taking a new, expensive drug? Or shortly after you need to replace your roof, you also have to replace your vehicle? The list goes on. Be sure to have a very good plan in place that's prepared to meet these roadblocks. And if you don't, find someone who can help you create one and get started on it sooner than later. Don't procrastinate this aspect of retirement.

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Your retirement years represent a significant life change that comes with its own set of challenges and rewards. And by understanding these realities, managing expectations heading in, and planning for the emotional and financial aspects ahead of time, you can navigate this phase of life more smoothly. Your later years can become full of wonderful experiences and memories instead of just sitting around and waiting for your day to come. But again, this takes some work.

Thank you for joining me today. I hope this discussion has provided some valuable insights and helped prepare you for what may lie ahead. And until next time, take care and cherish your golden years.

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Disclosure [00:14:14]:

Securities and advisory services are offered through LPL Financial, a registered investment adviser member at FINRA SIPC.

This material was created to provide accurate and reliable information on the subjects covered but should not be regarded as a complete analysis of these subjects. It is not intended to provide specific legal, tax or other professional advice. The services of an appropriate professional should be sought regarding your individual situation.