Thinking about Retirement?
When you think about your retirement, what do you imagine? A less hectic life, far less pressure and fewer deadlines? Freedom to commit yourself to a longstanding passion maybe? Will you still be making use of your professional skills and experience? Perhaps in a voluntary capacity? Or are you more likely to be doing something completely different? What do you think you might be doing on an average day?
Whilst some professionals have a clear view of how they want to spend their retirement, many more reach the later part of their full-time working life with little idea of what retirement might look like for them. And all too often, professionals approach the end of their full-time working life preoccupied with concerns about how long their retirement savings will last and whether they can actually afford to retire.
When you consider that a 21st century retirement could be as long, if not longer, than a working life, it makes sense to start thinking about that stage of your life well in advance. And some prior thinking about retirement options and possibilities can prove invaluable for people who find they are facing retirement earlier than they had planned due to factors such as job loss or ill health.
It’s never too late or too early for professionals of any age to think about retirement and it’s helpful to consider three perspectives:
- what ‘retirement’ means to you;
- financial considerations; and
- the psychological perspective.
What does ‘retirement’ mean to you?
In a broad sense, ‘retirement’ for a professional generally means that their life is no longer centred on developing a career. This need not mean that they are no longer in paid employment since many professionals transition to full retirement by working part-time in a role where their experience is valued and valuable. Others seek to continue using their professional skills and experience in a voluntary capacity; for example, many boards, committees and service organisations benefit from the contributions of retired professionals.
In contrast, some professionals retire with the intention of spending time doing the things that had not been possible earlier due to the time constraints attached to a full-time career. Travel, a current or new hobby, more time with family and friends often feature on retirees’ lists of intentions.
Whatever stage your career is at, including if there is more of your career ahead of you than behind, it helps pave the way for a good retirement to ask yourself what YOU mean when you refer to ‘retirement’ – and to think about the possibilities sooner as well as later.
It’s important to think about retirement from a financial perspective because it helps you put in place the arrangements that will enable you to fund the retirement you want to have. The alternative can be to find yourself limited to the sort of retirement you can afford; for example being reliant on a government pension.
There are two related areas to consider:
- saving/investing for your retirement; and
- personal financial planning.
It’s important to be well-informed about both aspects and to be clear about the difference.
Saving/investing for retirement
While you’re working you’re accumulating savings through superannuation – your employer’s contributions and, if you wish, additional contributions made by you. Your thinking about retirement from an investment perspective should include:
- being clear on the value of super contributions being made by your employer;
- having an understanding of the accumulating value of your superannuation;
- knowing the options available to you in terms of where your super can be invested;
- understanding how you can make additional contributions;
- tax implications of superannuation contributions, including, later in your career, ‘transition to retirement’ tax provisions.
Whilst employer contributions are mandatory, professionals can benefit greatly in retirement by making additional voluntary contributions. Starting to do this early in your career allows you to maximise the compounding effect.
Personal financial planning
Well ahead of your planned retirement, it’s worth obtaining professional help to develop a personal financial plan. It’s important to engage an independent expert; that is, a suitably qualified financial adviser who is not affiliated with any investment vehicle. Such a professional can work with you to develop an assessment of your income needs in retirement and to determine what level of savings you’re likely to need in order to fund the retirement you want to have.
The cost associated with this type of advice can be significantly outweighed by the benefit you derive from having a financial plan. And you don’t have to wait till you are on the brink of retirement before you start to think about potential income, likely expenditure and the lifestyle you want to be able to fund.
The psychological perspective
Whilst financial considerations are often top of mind for professionals when they think about retirement, there is an equally important psychological perspective to consider. This is because work is usually central to a professional’s sense of their own identity. As well, working life tends to have wide-reaching effects on many other aspects of life such as family, relationships, health and wellbeing.
Psychologists and HR professionals recommend that professionals think of retirement as a transition, not as an end point. The idea is that, whatever direction your personal retirement is to take, it will entail leaving some things behind and it will involve some new beginnings. A more satisfying and fulfilling retirement is likely when you spend time thinking about, and adjusting to, the particular endings and new beginnings that your personal transition to retirement will involve.
For example; in his early 60’s a general manager decided that he would transition to retirement by working three days a week in the industry where he had spent his entire career but that he no longer wanted to have management responsibilities. In the free time this made available he intended to develop his long neglected talent as an artist.
The ‘endings’ he thought most significant in terms of the need for him to adjust were 1) no longer having the status of general manager, 2) an end to business travel which he had enjoyed and 3) changing relationships in his professional network. He decided that the ‘beginnings’ that he would need to work most on were 1) using four day ‘weekends’ productively, 2) managing his work responsibilities in just three days and 3) working fewer hours than his wife for the first time in their long life together.
Adapting to a life in which work is less significant and managing your own transition to retirement can be challenging but ultimately rewarding if you undertake the right planning and, if necessary, seek assistance from relevant professionals including qualified financial planners, psychologists (some specialise in this area), career coaches and some HR professionals. Stepping out what retirement means for you, and how you might utilise your professional skills in different ways are likely to be the best starting points.
Looking for more ideas?
For members with an interest in further reading about topics covered in this article, the following articles are available on the Professionals Australia website.
About the author
Dr Janet Fitzell, a director of FourLeaf Consulting Pty Ltd (www.fourleaf.com.au), is an independent organisational consultant and facilitator, specialising in organisational and professional development.