I retired three weeks ago. Although I had looked forward to retirement for many years, it was surprising how much the actual event affected my outlook, financial and otherwise. My hope is that sharing this new perspective will be useful to others planning this important life event.
First, some background: I am 64, and most of my working life was 35 years spent in higher education. Retirement was motivated by the desire to explore old and new interests and my financial advisor's declaration that I could go whenever I wanted. Investments and a 403(b) plan (401(k) for non-profits) will provide 85% of pre-retirement income. Social security is being deferred.
How things changed on retirement day + 1
- I have extra appreciation for investments that provide solid, reliable income. After years of studying and working on income investing, it's gratifying to let them mostly run on auto-pilot and turn my energies in other directions. Some of the companies in this category are Intel (NASDAQ:INTC), Emerson Electric (NYSE:EMR), Dominion Resources (NYSE:D), Duke Energy (NYSE:DUK), and Welltower (NYSE:HCN).
- Money paid for investment advice was well spent. I engaged a financial advisor about 2 years ago. There's no substitute for the knowledge and wisdom of a person who helps people plan their financial future all day every day. The return on this investment was outstanding in money and peace of mind. In addition, the many, many hours I spent studying and arranging retirement finances were not for naught. It enabled the time spent with an advisor to be more effective. What you get out of something depends on how much you put into it.
On a side note, any advice I received from representatives who work for financial companies like VALIC or Fidelity was useless or worse, no matter how good it sounded at the time. These reps are rewarded solely on how well they "talk their book" (sell their own products), and your welfare runs a poor second.
- The development of good financial habits before retirement was important. Much ink is spilled about changes in lifestyle after retirement, but spending and saving habits built up over years or decades are durable. Being a frugal person means that little behavioral change is required in my case. I suspect that reducing the amount of change necessitated by retirement reduces the natural anxiety that is often associated with it. It may be especially important for those of us with inadequate retirement resources, part of the serious preparation and discipline will be critical to their success.
- Extra cash smoothes the adjustment. Many people feel some degree of financial insecurity around retirement regardless of their situation. This seems to be human nature and justified to some degree, because change and uncertainty are inevitable. New patterns of income and expenses need to be adjusted to, no matter how much advance planning is done. For the past 4 years, I put $100 a month into a special savings account as a contingency fund. Sure enough, already a big property tax bill (duh!) has shown up as well as $600 in unexpected medical costs because of insurance changes. Neither is going to drive me into bankruptcy, but the cushion makes the transition less jarring.
- Finally, the ratio of importance between short and long-term investment considerations quickly skews to the long term. Daily changes in the economy, markets, and Fed talk are like a flock of ducks quacking in a faraway pond, and about as relevant. Good pre-retirement planning makes those ducks sound very distant and small. The relative unimportance of daily events becomes more pronounced.
What you get out of retirement planning, as with many things, depends on what you put into it. Seeking Alpha readers are inclined to dedicate time and energy to their financial future, which puts them ahead of the average person. For this author, the view from the other side of retirement revealed some aspects of planning that were particularly fruitful, at least so far. Stress is part of any major life change, but when we apply ourselves to the task, it can open the path to what we hope will be a long and enjoyable part of life.
Disclosure: I am/we are long HCN, INTC, EMR, D, DUK.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.