Financial Playing may have a big role to play in retirement satisfaction

Sourced with thanks from  forbes.com

Retirement is neither the boon docks where you don’t want to go nor is it the panacea to all your current challenges. But it’s inevitable and you have to be looking for ways to ensure that you move towards the highest levels of retirement satisfaction. Remember that not only is retirement inevitable it could very well be very long. Take a peek at this article where the author presents a case for the role of financial planning in retirement satisfaction. Team RetyrSmart

Financial Playing may have a big role to play in retirement satisfaction

Retirement is a word that can trigger both positive and negative emotions. Work can be complex and include long days, frequent travel, conflict and unpredictable work environments. At the same time, work can provide opportunities for accomplishment, social interaction and financial benefit. Disconnecting from work or a career can be a positive experience for individuals who experience high levels of frustration and anxiety in their role. Conversely, leaving work or a career can be a negative experience for individuals who receive high levels of psychological success and notoriety from their role.

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In recent decades, the retirement transition has become more complicated as factors involving wealth and health have become more pronounced. The reduction in employer-sponsored defined benefit pension plans has eliminated guaranteed retirement income streams and placed the risk of market volatility on the worker. Similarly, the reduction in retiree medical benefits, as well as increased healthcare costs, have left many individuals wondering how to manage expenses that exceed the resources provided by public safety nets such as Medicare.

Our new economic realities, combined with the social emotional aspects of transitioning from work, make retirement overwhelming to think about for many, thereby adding more negativity to the experience. For those who did experience income loss during the pandemic, about half find retirement preparation stressful. Transitioning from work has become increasingly challenging especially for those who have not thoroughly planned for it or feel unprepared. In prior decades, following the general path of others into a life of leisure, which included checking off “bucket list” items, was satisfactory if you did not know what else to do.

Given longer life spans, developing a plan that is unique and motivating to you is increasingly important. Individuals who reach age 60 have a 50% chance of turning age 90. Your life in retirement has the potential to exceed the life of your career. Society encourages us to spend years carefully thinking about and engaging in vocational training to engage in work roles that provide meaning and value.

However, in comparison, little emphasis is put on the need to prepare for a similar length of time in retirement. The inability to find life satisfaction at this stage has been associated with increased anxiety, depression and physical health challenges. Older Americans who believe they have purpose in their lives are less likely to develop Alzheimer’s disease, have a stroke or cardiovascular event. They are also less likely to have chronic conditions and more likely to have above-average life spans. This leads to the question, what contributes to satisfaction in retirement?

Achieving Retirement Satisfaction

Achieving satisfaction is becoming increasingly important as more individuals opt for retirement in the current pandemic environment. Since the beginning of the pandemic, there has been a surge in the number of baby boomers announcing their intent to exit the workforce before age 67. In 2020, baby boomers hanging up their work hats exceeded 3 million compared to the yearly average of 2 million since 2011. This exit is explained in part by their increased wealth through asset growth in businesses, financial market investments and housing. Assets for Americans ages 55 to 69 rose by $4.2 trillion in 2020. Many individuals view the current environment as an opportunity to take profits and add to their retirement nest eggs.

Research has shown thinking about retirement and engaging in planning have a positive impact on retirement satisfaction. Retirement planning provides an opportunity to test financial readiness and consider potential life changes such as health and well-being that can increase expenses. Including trusted advisors in the process, such as a financial planner or accountant, can provide an objective voice and professional expertise as you make choices that impact your lifestyle financially.

According to research, individuals with higher income, higher net worth and a spouse or partner are more likely to achieve satisfaction. However, even when controlling for household income, net worth and relationship status, retirement planning does have a positive impact on life satisfaction in retirement. This same research also indicates that retirement planning positively impacts satisfaction even in cases where retirement is non-voluntary.

Although there are benefits from retirement planning, many individuals do not fully engage in the process. Over the past three decades, the Employee Benefits Retirement Institute (EBI) has conducted a survey to better understand worker and retiree confidence about retirement. While most workers are confident, they know how much monthly income they will need, only 44% report having thought about it in preparation for retirement. Also, only 48% of workers have tried to calculate how much their expenses will be in retirement.

Retirement planning is no longer only about financial choices. Although financial stability is an important factor in achieving satisfaction, non-financial factors such as socialization, community and individual purpose should be considered. Retirement planning should be holistic and consider:

  • Personal resources such as income and savings.
  • Healthcare costs and resources such as Medicare, supplemental insurance and long-term care.
  • Cost of living and the impact of inflation.
  • Meaning and purpose — what activities will provide joy and a sense of accomplishment?
  • Socialization — who will replace the network of friends and colleagues you enjoy through work?

If you find the thought of retirement stressful or need assistance establishing a road map to reach your goals, consider having discussions with others who have successfully made the transition, as well as seeking assistance from a trusted advisor.

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