David Kennedy has helped hundreds of families to prepare financially for retirement, but he says it’s just as important to prepare yourself for the lifestyle and non-financial aspects in the lead up to retirement.
Whenit comes to preparing for retirement, many conversations tend to revolve around superannuation, saving, and building a nest egg. And there’s an abundance of financial resources out there to assist – financial planners, superannuation funds, and an endless list of personal finance books.
But there are two important ways these discussions need to evolve.
Firstly, because the concept of retirement as we know it is rapidly becoming a thing of the past it means there is a need to better understand the many moving parts in the retirement planning equation to prepare effectively.
And financial preparation, while vitally important, is just one piece of the retirement planning puzzle.
The compulsory super system has ensured we have a very strong focus on the need to prepare for our financial goals in retirement – and that is critically important – but people tend to spend far less time planning for the lifestyle and non-financial elements of life after work.
End of the retirement age
The idea that you stop work suddenly at age 65 has really only been around since the early 1900s when the age pension was introduced. Back then, only about 4 per cent of the population was over 65, and many in the workforce would literally work until they dropped.
The need to plan for 20 or 30 years of life post-work did not yet exist.
Now, it’s predicted that a quarter of the population will be aged over 65 by 2050, while the number of Australians aged over 85 is expected to increase to around 2 million over the same timeframe (5 per cent of the projected population). Such changes represent major shifts in the way we progress through our life cycles, while turning historical notions of retirement on their head.
What used to be a logical age to stop working, such as age 65, has become increasingly arbitrary in an era of significantly longer lifespans.
What used to be a logical age to stop working, such as age 65, has become increasingly arbitrary in an era of significantly longer lifespans.
Longer retirements are expensive, and funding a multi-decade retirement can be a daunting task. While some people work past the traditional retirement age as they enjoy what they do, stopping work at 65 is simply not an option for those with savings that are unlikely to last the distance.
Yet not only are we living longer, but governments are increasingly stretched in their capacity to support as many people as generously as they age.
In January 2017 we saw evidence of a social security system under pressure as changes to the eligibility criteria for the Age Pension caused some 320,000 Australian retirees to lose some or all of their benefits.
In other words, if you are deemed to be of sufficient means, you are increasingly on your own.
To add another layer of uncertainty to the retirement planning equation, the changing nature of work, declining job security, and age discrimination often conspire to disrupt the best-laid retirement plans. Involuntary retirement is an unfortunate outcome where an individual finds themselves out of work in their 50s and 60s. Age discrimination rears its head in the recruitment process and the workplace, ending careers prematurely to the detriment of many.
Countless studies indicate that individuals, employers and society all benefit where older Australians are given the opportunity to remain engaged and active in the workplace in flexible ways – where they have a desire to do so.
Against this backdrop, what it means to retire is changing profoundly. Some respond to the above realities by continuing to work beyond age 65 on a full-time or part-time basis because the opportunities exist, they feel relatively fit and healthy, and simply wish to continue to contribute – ideally in more flexible ways as time goes by.
Others continue working out of financial necessity, and the sheer magnitude of the task of saving enough for a longer retirement. And of course, those in physically demanding jobs face the greatest challenge of all. It is simply not possible to continue working in many roles once your body has had enough.
As a life stage and an idea, retirement in the traditional sense has become redundant. Recent retirees have been progressively redefining the boundaries and norms of retirement – doing it on their terms, doing it with flexibility, and challenging what it means in your 60s to transition from one phase of life to the next.
Perhaps the most practical response, where possible, is the practice of shifting from full-time to part-time or fewer hours instead of stopping work altogether. While financially beneficial, a gradual transition can have benefits for wellbeing and satisfaction.
Solving the retirement planning puzzle
Finding fulfillment and satisfaction in retirement is about so much more than money.
In addition to a salary, the workplace provides many things that can be taken for granted – a sense of meaning and purpose, a source of routine, a forum for social connection, and an identity. In order to thrive when you stop working, it can be helpful to structure your day in a way that replaces all of these things, and money simply can’t do that.
From time to time you hear stories of people who retire and six months later they’re back at work. While this can be due to financial necessity, those who haven’t given much thought to how they will spend their time and structure their days can find the early stages of retirement mentally and emotionally hard.
Perhaps this isn’t all that surprising. It can be jarring to go from working flat out one week to being newly retired the next.
Perhaps this isn’t all that surprising. It can be jarring to go from working flat out one week to being newly retired the next.
Many people will enjoy a smooth transition to retirement, and things will go as planned. But for some, an absence of conscious planning and preparation for the non-financial aspects of life can contribute to mental health challenges.
How consciously and effectively you prepare for the retirement transition, in particular the first 12 months, may well determine the quality of your experience in the decades that follow.
Reframing the possibilities of retirement
With a conscious understanding of the context in which you are preparing for retirement, and consideration for the many pieces of the retirement wellbeing puzzle, you can reframe this phase of life as a beginning far more than an ending. An opportunity to really reconsider what you want the next phase of your life to be.
Because while many people are happy to clock off for the very last time and enjoy a life of leisure, at the same time, 30 years spent entirely at-play isn’t a fulfilling idea of life after work for others.
We are all different, but it may be a time to go in new directions, and explore hobbies, passions and interests that perhaps you haven’t had the time, money or imagination to explore in the past. Rather than it being a period of decline, it can be a period of reinvention.
We’re at a unique point in time where there are so many possibilities. We’ve got the gift of extra time on Earth. But the challenge is how do you spend it in a meaningful way? How do you spend it in a productive way, if that’s what drives you? And what do you make of those years to make them the best they can possibly be?
Talking to others who have already navigated their own unique retirement transition is helpful too. How did they transition from working life to what came next? What did they learn? What went well and what didn’t? And what advice would they give to the next generation when it comes to a meaningful and fulfilled life after work?
A counsellor, a retirement coach or psychologist could be another source of wisdom to get an external perspective on answering some of these questions. I expect we will see more support for navigating this side of retirement in the years ahead.
Paradoxically, preparing effectively for retirement is hard work. But it is work that is well worth doing.
David Kennedy is the author of End of the Retirement Age: Embracing the pursuit of meaning, purpose and prosperity and co-author of the forthcoming book, Finding Joy in Retirement, due for publication July 2019.
