Let’s start with an all-too-common scenario:
Kelly is READY. They’ve eagerly awaited the day when they can turn in their notice to the boss and close the work chapter of their life. They can’t wait to kick up their feet, poolside, sipping a margarita before heading out to their weekly mah jongg game. (Side note to our younger readers: Why is mah jongg reserved for Baby Boomers? Get with the program Gen X and Millennials, that game is the business.)
Kelly is growing increasingly frustrated, however, with Pat, who simply refuses to call it quits on their day job.
They’ve both saved diligently for decades. They engaged a financial planner for the very purpose of making this transition feasible.
But Pat just won’t let go. And Kelly’s growing increasingly frustrated with Pat’s inability to move into the next stage of their marriage: the retired years.
Everyone is different, but often, the reason someone is so resistant to retirement is fear.
Fear of not having enough of a nest egg.
Fear of not knowing what to do with their newfound free time.
Fear because their self-worth is tied to their work.
If you’re reading this and you’re already a Prosperity People client, scenario one is unlikely — this is the moment we’ve been working towards! If you’re reading this, but you’re not a Prosperity People client, then hit us up! Seriously. That’s why we’re here.
If you’re scared of how to fill your days or connect your self-worth to work, first of all, we’re here to tell you your basement cleanout project is likely to take longer than you think. But also, there are TONS of valuable resources already out there about this aspect of retirement. Some of our favorites to get you started?
Hire a retirement coach. Yes, really! It’s a thing!
Check out your local community college for non-degree course offerings or programs hosted at your neighborhood arts center. Try out a new hobby before you retire.
Peruse the self-help aisle of your favorite local bookstore. Select one of the many titles that speak to you.
But there’s another fear that soon-to-be retirees face that doesn’t get nearly enough airtime:
How do I transition from my mindset of save, save, save to suddenly spend, spend, spend?
Oof. That’s a biggie. And it is drastically under addressed. This fear is all about mindset. And if you know us, you know we love to talk about money mindsets. So, let’s dive in.
Work, Work, Work. Save, Save, Save. Now… Spend!
A jarring switch flips when you retire. Suddenly, you stop depositing and instead you start drawing. Instead of watching accounts go up, they may start going down.
If you’ve worked with a financial advisor and stuck to the plan, you likely have enough (and, more importantly, you've defined “enough”). You’re not actually experiencing a lack of financial savings, instead you’re experiencing a psychological sense of loss, because you’re finally taking from the nest egg you’ve built over decades.
It’s in your money DNA to save. Spending your savings, to many, is counterintuitive.
Thankfully, we’ve learned a few hacks along the way to help you mimic the financial routines you’ve grown accustomed to over the years.
Money Hack #1: Create the Sense of a Monthly Paycheck With Automated Account Draws
Pulling from your savings during retirement can work a few different ways.
You can ask Andy to push the button once a year and transfer $50,000 from your investments and into your checking account.
But you can also ask Andy to divide that $50,000 draw by twelve and hit send on a monthly basis.
This second approach mimics a monthly paycheck, creating a rhythm of drawing and refilling that looks and feels a lot like what most are used to in their work lives.
With this strategy, you’re still receiving a monthly paycheck, but now it’s coming from your investment accounts, not your employer.
Money Hack #2: Shift Your Money To Create a Mock Savings Goal
Some of us are savers. It’s our nature.
We get a sense of satisfaction when we successfully set aside extra cash for the future. And we feel secure knowing that we’re spending less than we earn.
But when your earnings stop, how do you still save? Now, instead of contributing to your IRA, you’re pulling from it. Yikes! Panic ensues.
Consider setting up a small withdrawal for the mere purpose of emulating your monthly saving habits.
We know of one savvy retiree who took a $200 monthly payment from her account and moved it, each month, into a separate savings account.
While it didn’t actually change her financial picture, it helped her feel like something had changed. She wasn’t just spending her earnings; she was also setting some aside for the future. Her habit of monthly savings was preserved, despite the reality that she’s simply shifting money from one location to another.
Money Hack #3: Scared of an Economic Downturn? Set Up Two Accounts.
You know that the market will ebb and flow. And you know that your financial plan allows you to weather short term losses, but if you’re someone who starts to panic anytime the stock market dips, consider setting up two separate accounts. One for your shorter-term financial needs and one for the long term.
The investment account for the long haul? That’s still invested in the market. Put it out of sight and out of mind. The investment account for the next five years? That holds your fixed income savings. It generally only decreases in significant value when you make a draw.
This strategy eliminates fear of temporary dips in the market because your immediate funds won’t be affected by a financial downturn. By the time you’re even going to pull from your stock portfolio, the market has had time to recover (or you and Andy have devised a plan to redirect your investments according to the new economic reality).
If You’re Not Enjoying Retirement, Then What’s the Point?
You deserve to enjoy your golden years.
Spending time with loved ones, making your own schedule, continuing to learn and grow — you’ve earned it. But now that it’s arrived, it’s natural to feel uncertain.
Changing your money mindset is one of the most challenging aspects of this major life transition.
Our money hacks are just three simple psychological tricks that can help you not rock the boat while you get used to so much change.
And seriously… if you haven’t already, get yourself a mah jongg set and start learning.