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The stereotypical vision of retiring includes gold watches, sun filled landscapes in foreign lands, vacation homes, and lots of smiling faces. We hold on to this vision to get us through the long road of a lifetime of work. A comfortable retirement is our motivation, and ultimately a reward for a job well done. For a few the transition to retirement is wonderful as they waltz into their retirement years with ease. In my observations over the past 25 years, I believe these lucky individuals are the exception, not the rule.
For most the transition to retirement is a very difficult time of their life. The distress that many new retirees feel is not widely acknowledged or discussed. For a life transition that is supposed to be joyous, new retirees often feel uneasy, fearful, and overwhelmed. Many feel like a rudderless ship. Issues surrounding self-worth, mortality, and lack of control can make a person feel anxious or even depressed. Spousal dynamics often change with the new schedule and routine and can be another source of stress, adding to the confusing mix of emotions that are part of this difficult transition.
Some things that I have seen help make the retirement transition easier are to acknowledge and understand that this transition is going to be another one of life’s challenges, and to prepare yourself for a full range of emotions. It’s perfectly normal to feel uneasiness for no particular reason.
Celebrate! Employers rarely throw a party for retirees anymore as most of us ultimately quit our jobs, or are downsized. Even if you retired some time ago, throw your own party or event to let you and others appreciate your accomplishment.
Communication is very important as you navigate the many emotions you will feel. Talk to your spouse, family, and friends openly about how you are feeling and you might find comfort in the fact that many feel the same as you do. Professional counseling can be very helpful.
Most importantly, ease into retirement. Many retirees feel out of control and rush to “take control” and end up making poor decisions about finances, housing or personal relationships when they should be taking a year of “vacation” to let the rhythms and patterns of your retirement life form. Give yourself a relaxed existence as you deal with the wide range of emotions that come with this difficult transition.
A majority of my clients are in retirement or they will be retired within the next 5 years or so. These relationships give me some great insight in to what retirement can be, for better or for worse. I have found over the years that my healthiest and even more importantly, happiest clients in retirement are those who are quite busy. I am often told that they do not know how they had the time to work as they feel even busier now and they are loving it!
Most of these busy individuals are doing some sort of volunteer work. You have probably heard people say that as a volunteer they get more out of it than they feel the person or organization they are helping is gaining from the relationship. And if you have given some of your time and energy to someone besides yourself, you know this to be true.
In a recent article, Fortune magazine named our wonderful city as one of 4 great places to retire. They identified four archetypes of next-generation retirees and found a place for each of them a college town for the academically minded, a city for the urban-inclined, a mountain town for lovers of the outdoors, and an overseas destination for explorers.
Personally I was quite surprised to see Seattle top anyone’s list. We all love living here and enjoy the great beauties that surround us, however all you hear from everyone is that it rains a lot and the skies are always grey. Journalists will often highlight the abnormally high occurrence of those diagnosed with Seasonal Affective Disorder (SAD), which refers to episodes of depression that occur every year during the fall or winter months. However, in this article Seattle was highlighted for the urbanite based on the city being a mecca for the arts with a small-town feel despite the size, and top-rated health care facilities.
If you have IRA accounts and are over age 70 ½, then you probably know about the Required Minimum Distribution (RMD) rules. These IRS rules require you to take money out of your retirement accounts each year, whether you need the money or not.
This money could be spent or re-invested back into a taxable investment account to allow it to continue to grow. Some people deposit this money to their checking account, and eventually use it to make a charitable contribution to the charity of their choice.
Fortunately, the government recently extended a provision through 2011, which allows individuals over age 70 ½ to exclude up to $100,000 from their gross income if it is paid directly from an IRA to a qualified charity. In addition, that excluded amount can be used to satisfy the RMD for the year.
This could potentially be a much more tax-efficient way to make charitable contributions than by depositing the RMD amount in your bank account and then writing a check for charity. If you’re a Merriman client, we can help you complete the paperwork accordingly, just give us a call.
To find out more information on this valuable topic, please discuss with your CPA or read this article from the IRS.
This article from T. Rowe Price provides some examples of prudent and not so prudent strategies for recovering from a severe market downturn in retirement. The study cited in this article once again illustrates how making wholesale portfolio changes during such a time can be the very worst idea, while keeping the focus on reducing portfolio withdrawal rates is optimal.
The only thing I would add is this: Because not everybody can significantly reduce their living expenses during a market downturn, although most can do so more than they think, this is yet another reason why it is so important not to enter retirement undersaved or without a comfortable level of emergency cash reserves. To do otherwise is a big gamble.