Retiring can feel like crossing a finish line at the end of a lifetime of work, and many look forward to days of leisure and changing pace. Although life with less structure and fewer demands on our attention is something we dream about, the truth is that sometimes retirement throws a wrench in our relationship with money. The switch from receiving structured, employment-driven income to drawing down investment accounts can be more complex. Professional guidance can help clarify what life after work is and the most cash efficient way to draw down on assets to ensure they last while minimizing unnecessary erosion from tax.
If you are already retired (or nearing retirement), you have worked long enough to see a vastly transformed economy. Factors like offshored workforces and manufacturing, corporate acquisitions, and the transition from a manufacturing-based economy to service, information and technology-based have fundamentally changed employment dynamics.
Some are fortunate to have a defined benefit plan or employer-sponsored pension plan. The 2019 pension coverage rate in Canada was 37.1%, a continued downward trend. It was 39.4% in 2009, 40.8% in 1999, and 46.1% in 1977.1 Most often, they are only available to employees working in the public sector or the largest Canadian-controlled private corporations. They are rare among most small to medium enterprises. More and more, they are not to be relied on as the only source of retirement income. It means the burden of saving for retirement has shifted to you. In the same way, your money mentality has changed throughout your career; it will change when you retire.
Changing Your Money Mentality in Retirement
During the working years, you will often ask if you are saving enough money for retirement. In retirement, you will ask how long that money needs to last while maintaining a comfortable lifestyle and doing what you planned.
During your working years, there are retirement savings goals. Then in retirement, the money you saved and watched grow is viewed entirely differently. While day-to-day living may cost less, there are more significant ticket items to spend money on since you have more time to enjoy them. A new goal may be to spend less that makes sense for the daily lifestyle and free up cash for greater adventure.
Throughout all the stages of your life, it is important to have professional guidance to help optimize your portfolio to balance your growth, security needs, and risk capacity. Once retired, you may look at dips in the market and other risks entirely differently.
During our income-earning years, what you do for a living is the primary source of income. In retirement, you have more flexibility. Some will choose to transition and work part-time or take on consulting roles. Others will pursue a retirement career that reflects a passion? The right one is what you choose.
Retirement Mindset Means More Than Just Money
When you think about it, suddenly moving from working 40 hours a week to zero can be a real shock to your system. Although it may sound great in theory, the truth is that we are creatures of habit—and we do not always react well to quick and dramatic changes. Some employers will allow you to ease into retirement by gradually shortening your workweek over a year or a couple of years. This can be a great way to get your toes wet before diving into full retirement. Use your days off to discover new hobbies, start volunteering, meet with friends and begin developing a new routine you can expand on throughout retirement.
If your current place of employment does not offer a gradual retirement option, you could search for a part-time job, perhaps something that’s more laid back or of interest to you. Easing into retirement helps reduce the shock and can be a great way to continue earning income without committing to a full workweek.
Everybody Needs a Helping Hand Sometimes
If you are struggling with your money mentality, there are things you can do to help. For many, this starts with making sure they are aligned with their passions—friends, family, travel, hobbies, volunteering, and more. Some look for role models, people like them who are wonderful examples of thriving in retirement. Others get help from their financial professionals to set and meet their retirement goals.
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