I’m a Professional Retirement Coach: 3 Biggest Mistakes Retirees Make
Imagine spending years thinking about what your retirement would look like. You envisioned finally being in total control of your time, no longer worrying about deadlines and meetings. But six months into retirement, it dawns on you: You aren’t enjoying it.
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According to Robert Laura, a certified professional retirement coach and founder of the Retirement Coaches Association, when most people retire, they think about “what they’re going to gain in terms of time and freedom.” However, they don’t think about what they’re leaving behind, such as the social connection and mental simulation that often derives from work.
Laura told GOBankingRates what mistakes retirees should avoid making so that they don’t end up feeling “out of sorts” in retirement.
Not Having Replacements for What’s Lost by Leaving the Workforce
Laura said many people “never question” retirement and why it’s something we do. “And the reality of it is, retirement is nothing,” he emphasized. “There’s nothing there.”
He explained that in retirement, people have to determine how they’ll use their free time; they can determine what they value and what matters to them. He stressed that’s vital to think about what you “want your legacy to be.” From there, people can begin living impactful lives.
“But you really have to stop, pause and say, ‘What do I want my life to look like?,'” he said.
He noted that it’s “great to be able to step away” from work. But you won’t feel fulfilled once you retire without replacing what made you feel “good and fulfilled at work.” For instance, he said that if you plan on golfing every day, that’s “not going to replace the things that you lost.”
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Laura explained that similar to how people have a financial plan for retirement, they need a written, non-financial plan before entering that new stage of life. In addition to thinking through how they’ll replace their income, they need to think through how they’ll replace their old work identity. He emphasized that they should ask themselves what their new identity is, how they plan on spending time with others and what their goals are.
“Oftentimes, retirement is the goal,” Laura said. “So once you get there, people don’t have 30- or 60- or 90-day goals into retirement, and again, they feel out of sorts — and so, it’s [about] stepping back and starting to acknowledge what you lost and finding appropriate replacements for it.”
If you’ve already retired without writing a non-financial plan for how you’ll replace your work activities and you’re in low spirits, Laura said you could write a plan and use it moving forward.
Not Having a Financial Plan for the First Year of Retirement
Finances are another big area where retirees can get things wrong. Laura said that one of the most significant financial mistakes people make is “not thinking through what an actual year of retirement is going to look and feel like.”
“They make vague or general assumptions, and the assumption is, ‘It’s all going to work out because I’m retired and I have more time and less distractions,'” Laura said.
But when feeling bored and attempting to find purpose and direction in retirement, it’s “very easy for their budget to get busted because they’re just buying stuff to do stuff or they’re taking trips they didn’t anticipate or they think they’re going to be happy as a result of having a new kitchen or that family is going to come over.”
Ultimately, Laura explained, without a plan for what you envision your initial year of retirement to “look and feel like,” you can easily “overspend and bust your budget in the first few months.”
Laura said that if retirees realize they’re not spending in alignment with their budgets, they should “quickly reassess” what they’re doing right and wrong. Sometimes, he added, bringing in a third-party expert such as a financial advisor or retirement coach is necessary.
“Everyone deals with money differently, and if one spouse or individual feels differently about money than the other, it’s going to cause conflict,” he said.
Being Too Conservative With Asset Allocation
Another financial mistake? “Over-allocation to conservative assets hurts people in the long run,” Laura stressed.
He explained that there’s a “historical thought process” that retirees need a “stronger mix” of bonds versus stocks. But that, he said, “isn’t necessarily true.”
“People tend to become overly conservative,” he said, adding that in turn, “inflation can really eat away at their portfolio.” He noted that if your money has to last you another three or four decades, “it has to grow, and it doesn’t grow in fixed income.”
For instance, he said, retirees are leaving money on the table if the cost of living is rising by four, five or six percent — and they’re just generating three percent on their CDs or bonds.
The key to strategic asset allocation, he said, is to avoid “taking a short-term or overly conservative view.” Instead, retirees should examine if costs, such as healthcare and mortgage rates, are surpassing “typical expectations.” If they are, then retirees “need to take on more risk which is done with equities.”
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This article originally appeared on GOBankingRates.com: I’m a Professional Retirement Coach: 3 Biggest Mistakes Retirees Make
