A (somewhat) irrational fear

Part 1 – Retirement mini-series

Retirement may seem like the “great unknown” and financial concerns are a key part of that perception. But with the right advice and a robust financial plan in place, replacing salary with income-generating assets is readily achievable.

Over 25 years of working in financial advice I’ve learned that a lot of people fear retirement.

In fact, when I started my own career, I underestimated the level of concern I’ve since come to understand well.

It surprised me how people were so anxious about turning off the income stream they get from going to work. Not that I assumed it wouldn’t worry them, but even people with significant financial assets exhibited similar behaviours.

It seems to be the case regardless of how financially secure they may be. Part of it might be that people wonder what will define them after they retire if it’s not their job.

But the big thing is that they’ve had this whole lifecycle of being able to buy new things or spend $500 on dinner, then going to work and earning an income so they can pay off the credit card next week. And that’s a comfortable routine without too many moving pieces to upset it.

As soon as people start thinking about retirement, there’s a big piece – the salary component – that’s going to be missing in the routine.

So, a lot of people actually defer the decision to retire for another year. This gives them the grace period to become accustomed to the finality of it all, but at the end of that time they’re in exactly the same situation.”

When I understood people had an all-too-common and often irrational fear of retirement, I realised there was a need to educate clients that they could put strategies in place to swap a regular salary for income-generating assets.

Once people come to that realisation, they quickly become a lot more comfortable with the prospect of retirement.

I noticed this and started presenting the same concepts in a different manner so they could relate to the income from salary being replaced with the income from investments. A subtle change to the narrative, but it had a significant impact on the comfort levels of my clients.

Retirement finances are not something to be planned at the last minute.

While some people may only have an epiphany 12 to 24 months before they plan to step out of full-time work, a longer-term approach is far more sensible.

If you’re two years out from retirement and you don’t have the resources, it might be too late.

But if you’re 50 and want to retire at 60, good financial advice will include a 10-year plan to achieve your retirement goals.

It doesn’t matter if you already have the resources or if you’re a bit short and need to bridge the gaps to get where you want to be. You have 10 years to get there and starting now will make a difference.

A good adviser will work with a you as your plan evolves and changes with you, and help you adapt to the conditions you go through.

Depending on how your job or life situations change over that decade, with a good plan in place and a good financial advisor to help take advantage of opportunities, you can rest easy and reduce the worry and responsibility of managing the transition to retirement.

You’ll feel comfortable that you’re going to be OK, and that takes away 10 years of worrying. And who knows, it may even add years to your life.

Catch Part 2 of the retirement mini-series next month.

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