04 May, 2013

Do you know what you will be doing in retirement?

Retiring early and putting the leg up is an idea, which appeals to lots of people. As financial planners, we find that early retirement  to be one of the favoured goals, in atleast half our clients.  Why is it such a major draw? We find two reasons.

Reasons for early retirement -   One – they want to be financially self-sufficient by a much earlier date, so that they can disengage from the rate race. Then they want to work on, without any financial pressure on them. Some want to work part-time as consultants, which would leave enough time for relaxation or to pursue other interests.

Two – they just want time to relax & money enough to see the world;  do social work or pursue hobbies without worrying about money.

So, it’s essentially about two things. They are fed up with the rat race, want to accumulate money fast & opt out. The other is that they want to pursue some hobbies or other interests and need time for that.

It has almost become a fad now.  But, when we see if they will be financially secure by the time they want to retire, most times it does not work. In some cases we have found it to work. But we are never sure if they would actually stop working as per their original intent. We have seen that it did not happen in atleast one case, where he wanted to retire by 42. He was financially secure by 42, but did not want to retire. There was another reason… he had also added some aggressive goals, since we made the plan initially.

So, we find that people are never able to get off the tread mill, though they intend to. But it is a comforting feeling for them to know that they are financially secure and can live without worry.

Are they prepared?    The other reason why they leave – to pursue hobbies, do social work etc.  For most, it looks like the ideal thing to do.  But, when we dig deeper to see if they really mean it, we find that it is but a whimsical idea. Most have just not thought through it properly.

When we ask our clients to imagine what they will do 24 hours of the day in retirement, they get enthusiastic at first. But, when they start filling out what they will do 24 hours of the day, they start to realize how much time they would have and how bored they could get.

Many had said that they want to teach in villages / do social work. Lots of such people have never taught in their lives and do not know what it entails.  They don’t understand, for instance, that teaching is not for everyone.  Also, if they have expertise in a specialized area, will it not be more useful to assist / mentor people in those areas? This may result in more satisfaction as they would be passing on their expert domain knowledge to others, ensuring that their knowledge, experience & expertise is not lost forever.

Similarly – social work.  For most people, this again looks like the correct thing to do, as they feel that they have got so much from the society and would like to give back something. Again, the sentiment is fine & laudable. But lot of people find to their surprise that social work is not their cup of tea.

Even people who simply want to relax or pursue hobbies find that there is simply too much time on their hands. Retirement is seen as the time for enjoyment & rightly so, as one has worked the entire life and deserves a peaceful and relaxed life, after retirement. But boredom catches on… many find that after a few months, travel, hobbies, social activities etc. do not have the same attraction to them, as it initially did. 

Early retirees find that their contemporaries are still working and hence don’t have the time for them. At some point the early retirees start questioning their wisdom. And then when it appears to them that it is a mistake, they want to get back to work. Getting back is a lot more difficult. So, they start doing some assignments, where possible, or do work which is far lower than the one they were used to. All these are stress points for them.  

Preparing for retirement -  Whether It is early retirement or retirement at superannuation, one needs to prepare for the day of reckoning.

There are ways to be meaningfully involved in cultural, social, religious, personal work in retirement. One needs to be able to identify, what one wants to do in retirement.

For that, it is better to try them out and see if they really would be interesting. We suggest that people should start trying out things they want to do in retirement,  a couple of years before retirement .  They should play that round of golf a bit more frequently and see, if it grips them. For those who want to do social work, they should try their hand at teaching or doing other work in the weekends and find out if the attraction is for real. Lot of these things might look interesting initially. So we suggest that they try it out for atleast six months and then see, if the activity will be a good one to pursue in retirement. Lot of seemingly great pastimes, fall by the wayside, when subjected to this discipline.

Similarly, many would like to relocate to their villages after retirement. City dwellers find it very difficult to adjust to the perceived charm of the villages, which look alluring, when one goes on a short visit. Actually living there exposes one to the harsh realities – like lack of medical facilities, power cuts, voltage fluctuations, lack of entertainment avenues, disconnect with the people living there etc. So we recommend in such cases that one should try it out for about six months on rent, before making up their mind to shift lock, stock & barrel.

Ultimately, we all need to figure out some activities that will interest us and keep us engaged. Else, the retirees end up watching TV & spend the rest of the time in sheer boredom.  

Article by Suresh Sadagopan   Published in Business Standard 
For  Comprehensive Financial Planning come to the experts - Ladder7 Financial Advisories

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