How Your Money Mentality Should Change in Retirement

For many, reaching retirement feels like crossing the finish line at the end of a 30-, 40-, or even 50-year marathon. After decades of work, many of us look forward to the low pressure days and the rest and relaxation that retirement offers. Although life without alarm clocks may be something we dream about, if we are not properly prepared, retirement can throw a monkey-wrench into our financial lives. Specifically, going from receiving regular paychecks to drawing down the nest eggs we built over a lifetime can lead to some unexpected challenges. 

If you’ve lived long enough to retire, you’ve lived long enough to see a vastly transformed economy. Things like offshored workforces replacing U.S workers, ports clogged with the products we need that were manufactured halfway around the world, corporate acquisitions that result in forced early retirements, and the transition from a manufacturing-based economy to one of service, information, and technology has fundamentally changed employment dynamics. These changes have resulted in pensions going the way of the dinosaur, except in some public-sector jobs. This means the burden of saving for retirement has shifted to you, the retiree. And just as your money mentality has changed over the course of your career, so too does it need to change when you retire. 

Changing Your Money Mentality in Retirement

Before retirement, you wondered if you were saving enough; now, your mind goes to how long that money needs to last to enjoy retirement, create a legacy, and be prepared for all the unknowns.

You used to set retirement savings goals. Now you set spending goals that make sense for your lifestyle. 

The fear of overspending can keep some retirees from realizing certain long-held goals, like taking a bucket-list trip. They worry they will spend too much, jeopardizing their ability to live well in retirement or leave assets for their children. HCM Wealth Advisors can help you plan in advance and develop a spending strategy that can help you do it all - take that trip, live well in retirement, and leave a legacy for your loved ones. You used to manage your portfolio to reflect your growth goals and willingness to absorb, and even profit from, market volatility. Now that you’re retired, you may look at dips in the market and other risks in an entirely different way. 

You (probably) used to work full-time as your primary source of income. Now, you have more flexibility. Would you like to work in retirement? If so, do you want to work part-time? Consult? Or do you want to pursue a retirement career that reflects one of your passions where you have little or no worries about money? 

Going from accumulating wealth to living off wealth requires a change in how you think about  money. When you’re figuring out how you’ll allocate funds for the next 30+ years, it may be tempting to assume you will spend an equal amount each year in retirement. That’s not always the best approach; first of all, with a proper approach to time diversification, risk management, spending guardrails, and safety-net protection, your existing assets should continue to grow.   Also, this strategy doesn’t reflect the actual experience of most people in retirement.  Typically, retirees spend more money in the early years of retirement while they are young and active, tapering down in the middle of retirement, and increasing again late in life when they may need more care and assistance.  To be properly prepared, a thoughtful retirement plan is essential. 

Retirement Mindset Means More Than Just Money

When you think about it, suddenly moving from working 40 hours a week to zero can be a real shock to your system.  Many people have problems adjusting if they have not thought about what they will do with their newfound free time. Although it may sound great in theory, the truth is that we’re creatures of habit—and we don’t always react well to quick and dramatic changes. Some employers may allow you to ease into retirement by gradually shortening your workweek over time. This can be a great way to get your toes wet before diving right into full retirement. Use your days off to discover new hobbies, or rediscover the things you used to enjoy, start volunteering, meet with friends, and begin developing a new routine you can expand and enjoy throughout retirement.

If your current place of employment does not offer a gradual retirement option, consider a part-time job, perhaps something that’s more laid back or of interest to you. Easing into retirement not only helps reduce the emotional shock to your system but can also be a great way to continue earning income without committing to a full workweek. 

While you might want to do it all, establishing priorities ahead of time is key. Do you want a larger home so that family can visit, or would you prefer a smaller home making it easier to travel more? Figure out what means the most to you when creating your retirement plan and bucket list.  

Everybody Needs a Helping Hand Sometimes

If you’re struggling with your money mentality, there are things you can do to help. For many, this starts with making sure they’re aligned with their passions—friends, family, travel, hobbies, volunteering, and so much more. Some look for role models, people like themselves who are wonderful examples of thriving in retirement. HCM Wealth Advisors is here to help with the financial end of retirement to assist in setting and meeting your money goals.

Mike Hengehold, CPA/PFS MST RICP® Mike is the Founder and President of HCM Wealth Advisors. Over the last 30 years, he’s provided financial planning guidance to a myriad of families to help them realize their financial dreams. Mike is an avid homebrewer and animal lover, and when he’s not at work you can often find him on the golf course working on his short game.