Advisor Insight: The Psychology of Retirement

clinton_brownWritten by: Clinton Brown CFP® ChFC, CLU, CASL® / BCJ Financial Group / Author of Financially Sound

I would never claim to be a psychologist, nor would I have the time to go and obtain a degree of that level. However, I do have years under my belt working in the Financial Services arena. I have noticed something very interesting, something that needs to be studied and explored more. Something that needs more solutions and more guidance. That would be the Psychology of Retirement.

During our working life, we are told over and over to save, budget, put away, and steer away from spending. We are consistently encouraged to be frugal and to try and build retirement accounts up to as large a size as possible.

In doing a financial plan, there are specific goals and numbers that are focused on and re-worked, creating almost an obsession of making sure the right amount of money is being saved and that the investments are returning what is needed to reach the goal.

This retirement goal could then be moved up, or even backed up based on life events that may occur. From an unforeseen lay-off to a financial windfall, there are multiple reasons that a retirement plan can shift.

An investor has spent years, decades, and maybe even half a century SAVING their money. In most cases, they have watched their savings or retirement plans increase in value on a regular basis.

Sure, there are most likely market corrections or investments that go bad, but in general their accounts continue to go up. So as they save, as they watch their accounts grow, they get accustomed to that feeling. The feeling of watching their bank accounts grow, while scrimping and budgeting to the hilt. This is the life they have been accustomed to for many, many years.

Now, the day comes when they need to retire. The celebrations, the pats on the back, and the congratulations all lead up to the big day. Then, when that day happens, they now are facing a different reality with their money. Now, it is time to spend it.

Those that have prepared for this moment have a psychological advantage compared to those that have not. However, even those that have prepared still have a hard time watching their accounts begin to go down as they live off of their savings.

Now they are facing the complete opposite. They need to spend their money or at least its earnings. They need to be okay with that, in order to rest easy.  If they are not okay with that, it will make for a long, sleepless retirement.

So how do we overcome this psychological hurdle?  How do we rest easy knowing that it is time to spend our money?

What we have found is that clients that have prepared for retirement have felt much more peaceful than those that don’t.  Planning for retirement gives an accurate depiction of all income sources, from social security, rental property and pensions to retirement accounts, deferred compensation, and future inheritances. Through this organization, you can find a peace of mind that is invaluable.



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