- You should spend a number of years planning for your transition into retirement
- Consider your keys of happiness when planning for retirement
- The Transition To Retirement (TTR) strategy is a good way to gauge what life might be like when retired
When you reach your 50s, you tend to start thinking about retirement. You will likely be excited to not be working anymore. But how do you keep yourself busy now? And what will you fill your days with when you no longer have a 9-5 job?
People tend to struggle to find a purpose in retirement, especially if they haven’t put any thought behind what they want to do to keep themselves busy.
Planning your transition into your retirement is the only way to prepare yourself for your new retired life.
Why don't people plan?
There are usually five main reasons why people don’t plan for their retirement, an usually it involves their struggle to let go of their job:
- Fear of an unknown future
- Fear about a loss of identity
- Financial uncertainty
- Fear of ageing
- Fear of losing life’s meaning and purpose
A lot of your career, work or business can be tied into your identity, so it’s understandable you don’t want to consider your future without a job.
Planning for your future after work is one way you can deal with that loss of purpose and find something to fill it instead.
Peter McKnoulty, Founder of Transition Planning Australia, explains that in his experience, people barely think about the transition into retirement.
“[People] are not at all prepared. Part of the problem is that they have no idea that they need to do anything about it. They just think they will just waltz on from work or business and then life will keep going, because they don’t think they have to plan for it at all,” says Mr McKnoulty.
He goes on to explain the impact of not being properly prepared for the next stage of life.
“There are different components of it there, part of it is people are reluctant to let go. And those that do, haven’t planned properly.
“When people leave their businesses or work, unless they spend time to find new activities to replace those work ones, that is when they risk falling into a hole, becoming bored and depressed, and then it is a slippery slope from there.”
Typically, Mr McKnoulty finds that males struggle to let go of their careers, especially if they have their own business. This is where succession planning can become more difficult.
To avoid falling into a rut after retiring, you need to find ways to remain part of the community and make a meaningful contribution to those around you, to the public or for yourself.
Planning for retirement
How did you fill the last 25 years of your life? Do you know how you going to fill your time for 25 years in the future when your career is no longer there?
People aren’t planning for retirement because they don’t think they need to, when in reality, life expectancy is 15-20 years longer than what it used to be in the 50s and 60s, says Mr McKnoulty.
“People would retire at 65 and life expectancy may be they would live until their early 70s. It was only a short period of time and they weren’t particularly healthy, so there wasn’t a need for a whole lot of activities and time,” explains Mr McKnoulty.
“Sitting on the porch and watching Oprah was an option then, but now, of course, longevity is such that people will live to their 90s and typically still retiring in their mid 60s, plus or minus, well that is 25 years.”
The current ageing population is a lot healthier than previous generations, which is leading to a longer retirement.
It is necessary for older people to make a plan that includes all five keys to happiness, which Transition Planning Australia outline as financial security, physical health, mental health, social connectedness and a sense of purpose in life.
Mr McKnoulty says, “One of our exercises around helping people work out what their identity is and what is important to them, one of the things we suggest to people is what did they like doing when they were younger. It gives a bit of guidance on what you can try in the future.
“A lot of our identity is tied into that business or work. You really have to reinvent your life and find a new identity.”
He says the ten lifestyle areas you need to plan your retirement around are:
- Volunteer/philanthropic work
- Income-producing work
- Spirituality/ faith
- Social connections
- Activities with family
- Activities with spouse/ partner
- Recreational/ creative
- Intellectual stimulation
- Physical health
Mr McKnoulty adds that he often sees people take a “grown up gap year” before they re-enter the workforce because they haven’t adjusted to the retirement life as well as they expected.
Planning with the ten lifestyle areas in mind can really benefit you in the newest chapter of your life.
Transition To Retirement (TTR)
If you aren’t ready to fully retire or want to slowly move into retirement so there isn’t too much shell shock, the Transition To Retirement (TTR) strategy might be a good option.
This strategy allows you to access some of your super while you keep working. However, this can be difficult to organise and really complicated, you should talk to your super fund or a financial adviser first.
The TTR can be used if you are aged between 55 and 60 and are still working. If you are working reduced hours, then you can top up your income through your super. It also help boost your current super while saving on tax if you are still working full time.
Some positives for TTR is that you will still receive super contributions while you work which will replace any more you take out, you will pay less tax, and it also means you will begin to plan for your retirement.
A downside to TTR, however, is that it does affect your current retirement income because you are accessing your super earlier than usual, and it is a very complex system. A TTR can also impact any Government benefits you, or your partner, are receiving.
If you decide to try the TTR strategy, it can be beneficial to some to start thinking about what they are going to do in retirement or how that might look to them. As you are reducing your hours, it means you have more time to focus on you and the important things you want to focus on once you fully retire.
How are you planning out your retirement? Tell us in the comments below.