Consider this before retirement
Leaving the working life for something better requires early ongoing preparation.
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Many working people fantasise about retiring. Others are forced to retire while still wanting or needing to work – due to retrenchment, family, and caring crises, or ill health. One in five of all people who retire are forced to do so because of sickness.
Fantasising about retiring should be guarded against in case it leads to an ill-judged decision based on emotion and a lack of research and preparation.
Research suggests we should be taking a three-pronged approach that also covers our health and career planning.
Professor Joanne Earl, from Macquarie University’s Centre for Ageing, Cognition and Wellbeing (CACW), errs heavily on the side of thoroughly investigating before pulling the retirement trigger.
“The reality is that a lot of people will exit the workforce planning to retire and then find themselves needing to return out of financial necessity or boredom,” Professor Earl said.
“Coming back may not be as easy as you think, because ageism is a common problem for older people seeking re-employment.
“On top of this, your circumstances have changed, and if you’re being forced back to work, you might not feel the same way about your job anymore. Even if you used to enjoy it, there could be some resentment to contend with.”
Health is crucial as it has a big influence on how we can spend our retirement.
Questions to ask ourselves include whether we’ll be well enough to do what we’ve planned, and if we do want to work for longer, whether our health will be good enough to allow that.
Retiring “cold turkey” from a life-consuming job can lead to disappointment, which can be a difficult state to come back from. Scaling work commitments back to part time or casual allows would-be retirees to test the water before jumping.
Professor Earl says most people underestimate how much money they will need for retirement and how long their superannuation and investments will last.
The Age Pension is still the main source of income for most retirees. In 2018-19, just 30% of retired men aged older than 45, and 17% of women, cited superannuation as their main source of income.
The numbers for women were skewed by the fact that some had no personal income. On average, Australian women finish work with 23% less superannuation than men due to time out of the workforce for parental leave and caring, having a severe impact on their retirement finances.
Most retirees aspire to a “comfortable” lifestyle in retirement. It’s important to calculate what that means and how much you need.
“If you don’t own your own home, then you have to take rent into account, and this is something not included by some of the popular calculators of ‘comfortable income’ used to work out retirement needs,” Professor Earl said.
“If you’re expecting to take round-the-world holidays, that’s going to require a different level of retirement income than an occasional week at a caravan park, cooking your own meals on the campfire.
“These miscalculations are understandable, because looking at your super account, you’re probably faced with the biggest pool of money you’ve ever seen, and you might think, ‘Oh, I’ve got a lot of money! I’ll be fine.’”
Professor Earl’s top tips include:
Work hard on your health: Keep yourself fit and healthy so you can retire when you want and anticipate change where you can, so you have your ducks lined up in case things don’t go as well as you planned.
Aim to leave on your own terms: Being forced out of work unexpectedly from ill-health or redundancy may make it more difficult to adjust to retirement. Studies put workplace exit conditions in the top five factors predicting life satisfaction at an older age.
Don’t assume staying at work as long as possible is right for you: Some insurers report mental health claims outstripping those of other illnesses (including cancer), so carrying on regardless when work is taking a toll might not necessarily be the best option.
Think about ways to scale back if you need to – move to part-time, start succession planning, and consider ways to strategically exit key projects or clients.
Fear of being bored is probably unfounded: While it is true that some people find it difficult to adjust to life after work, most adjust well and get happier over time.
If you are enjoying your work there is no need to retire unless you feel the time is right for you, or you are physically or cognitively compromised.
But it’s still worth thinking about how you will spend your time.
Practise the transition: Research found only about 21% of people who say they will take up new activities in retirement actually do so. So, start easing yourself into networks and activities you plan to enjoy into retirement.
It need not be an all-or-nothing affair: Ask yourself, “Why do I want to leave? Is it my work I’m leaving? Or the organisation? Or my boss?” If it’s the latter two, you might want to explore other options, such as becoming your own boss or finding another organisation better aligned to your values.
Look around to find examples of flexible career paths – the lawyer who manages fewer long-term relationships, the academic who focuses on writing, or the CEO who coaches successors.
The social stuff is really important: Develop strategies for good health, keeping your brain active and meeting new people. Start getting into the habit of setting those goals now. Not only will it help you get started, but it will pay dividends in promoting better retirement adjustment when you do retire.
Related reading: AFR, NSA, Macquarie University
