Retirement is often envisioned as a blissful period of relaxation and enjoyment, finally free from the stress of our working years. However, the reality can often be starkly different. Every day, thousands of Americans retire, only to find themselves short on cash, friendships, and plans. Many retirees express regret, realizing too late how they could have better prepared for a more financially secure and rewarding postwork life. They wish they had saved more, fostered stronger relationships, prioritized their health, and cultivated new pursuits.
Why is retirement so challenging to prepare for? A major reason is that we often lack tangible models of successful postwork life. We see myriad examples of professional success in our culture, but the image of what a successful retirement looks like is far less clear. To better understand how to prepare for this important phase of life, we turned to those who have experienced it firsthand. By exploring the lessons learned from retirees and financial advisers, we can glean important insights that can help us plan better for every life stage.
1. Investing for Retirement Means More Than Money
Jim Pilzner, a retired entrepreneur, learned the hard way that retirement is not just about having enough money. He found himself regretting not setting meaningful goals when he retired. After realizing there’s only so much golf to play and so many lunches to attend, he discovered that what truly motivated him was the pursuit of knowledge. He enrolled at the University of Nevada, Reno, and started working towards a degree in political science and history.
His experience underscores the importance of planning not just how to spend money in retirement, but how to spend time. Many retirees often overlook the need to plan for a different source of purpose in retirement. Retirees frequently don’t realize how much their career provided a sense of identity and self-worth. As Betty Wang, a financial adviser in Denver, advises, it’s crucial to identify what drives you and what success really means to you before you retire.
2. Relationships are the Key to a Rewarding Retirement
The best predictor of longevity, health and happiness in later life is the quality of your relationships, as noted by the Harvard Study of Adult Development. Dan Roberts, a retiree in California, wishes he had kept up with former colleagues for personal and professional reasons. He retired about 18 months ago, and soon after, his son and his family moved to New Zealand. Having kept his relationships strong and his professional certification active, he would have been able to afford more frequent visits to his family overseas.
David Edmisten, an adviser in Prescott, Ariz., observed that some clients regretted delaying retirement because the extra working years came at the cost of missing time with family and friends. Some even experienced the loss of loved ones during this period, lamenting the missed opportunities to spend more time together. Thus, maintaining and investing in relationships is paramount to achieving a fulfilling retirement.
3. Retirement is Likely Longer Than You Think
Many of us underestimate how long we will live in retirement. Arthur Parmentier, 69, regrets retiring at 65, as he missed out on additional years of contributions to his retirement account. He claimed Social Security at 65, thereby accepting a lower monthly benefit than he would have received by waiting.
Based on 2019 data from the Society of Actuaries, the life expectancy for a 65-year-old is 84 for men and nearly 87 for women. Many Americans underestimate these figures, which can lead to insufficient financial planning for retirement. For instance, Social Security increases the payment for every month of delay in claiming benefits. Many people would financially benefit from waiting until 70 to start receiving these benefits, when monthly benefits before cost-of-living adjustments are 76% higher than at 62, according to Laurence Kotlikoff, a Boston University economist. A person who postpones benefits until age 70 instead of 62 would have to live to at least 80 to come out ahead. Therefore, understanding the longevity trends and strategizing the claiming of benefits could greatly impact the financial stability during retirement.
Key Takeaways
These lessons underscore the importance of considering retirement as more than just a financial transition, but as a life transition that encompasses health, identity, relationships, and fulfillment.
- Plan for your time, not just your money: Identify what drives you and how you will find fulfillment in retirement. Consider furthering your education, picking up new hobbies, or volunteering.
- Foster relationships: Quality relationships are a key predictor of longevity, health, and happiness in retirement. Stay connected with friends, family, and former colleagues.
- Prepare for a longer retirement than you think: Understand the latest longevity trends and strategize accordingly. Consider postponing claiming social security benefits to increase your monthly payout in the future.
Retirement should be a time of joy and fulfillment, not a period of regret. The experiences of those who have already walked this path can provide a valuable roadmap. Learn from their wisdom, and take steps today to ensure a better tomorrow. Remember, as Daniel Pink notes in his book “The Power of Regret,” while regret may make us feel bad, it can also help us do better. We have the opportunity to learn from the regrets of others and apply their hard-earned lessons to our own retirement planning. So, start planning today for a better retirement tomorrow. You’ve earned it.
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