Achieving A Comfortable Retirement – Part 1

Overcoming Psychological Challenges

Planning for retirement can be an overwhelming task, with numerous challenges to overcome. Generally, these challenges fall into two categories: psychological and portfolio management/construction. Over the next few weeks, I will offer guidance on these categories aimed at those who are nearing retirement or already retired. Let’s begin by addressing the psychological hurdles:

Replacing a sense of purpose

Retirement is a highly anticipated event for some, but for others, it can bring about fear. This is because having a job means more than just having an income. A job allows people to build relationships with clients and coworkers and feel a sense of purpose through meaningful work that benefits the community. After retirement, this sense of purpose and belonging can disappear, leading to an unfulfilling retirement.

To address this, pre-retires should spend a considerable amount of time before retirement planning how they will replace this sense of purpose. Start by writing down specific goals you want to achieve during retirement and seek objective opinions from close family members and friends to see if those goals can replace the void left by work.

Fear of Portfolio Reliance vs. Income

One of the biggest psychological hurdles retirees must overcome is the shift from relying on earned income to relying on their investment portfolio. During their working years, investors tend to downplay the risks within the markets and their portfolios. However, upon retirement, the investment mindset changes as retirees become more aware of how mistakes can significantly impact their lifestyle.

To overcome this apprehension, it is recommended to plan early for retirement. This may involve developing strategies and constructing a retirement portfolio years before actual retirement. Seeking the help of a Certified Financial Planner™ can also be beneficial if the process seems overwhelming.

Desire for Perfection

Like many things in life, we humans often let the perfect become the enemy of the good. It is important to understand that no plan can be perfect, and pursuing perfection can hinder progress. Having a sufficient plan is the best one can ask for. This means creating a portfolio that can grow assets at a pace ahead of inflation while maintaining a balanced lifestyle throughout retirement. It is also essential to understand what assets are owned and how they will perform in both good and bad markets. Seeking professional advice can be helpful if one does not feel confident in structuring a plan to address these issues, as mistakes in retirement can have severe consequences.

In Summary

Planning for retirement can be overwhelming due to psychological and portfolio management challenges. Psychological hurdles include replacing a sense of purpose and overcoming fear of portfolio reliance versus income. To address these, it is recommended to plan early for retirement, seek objective opinions, and develop strategies. Additionally, retirees should avoid pursuing perfection and instead focus on creating a sufficient plan that can grow assets and maintain a balanced lifestyle throughout retirement. Seeking professional advice can also be beneficial for those who need additional help.

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certified financial planner Marshall Clay wears a gray jacket and white shirt while posing for professional photo in office

Marshall Clay CFP, J.D., is a Partner and Senior Advisor at The Welch Group, LLC, specializing in providing Fee-Only investment management and financial advice to families throughout the United States. Marshall is a graduate of the United States Military Academy in West Point, New York, the Cumberland School of Law in Birmingham, Alabama, and is a CERTIFIED FINANCIAL PLANNER™.  In addition, Marshall is a frequent guest on local television stations as an expert on various financial planning matters.


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