How To Know If You Are Ready To Retire

by : John Trauth

So that day that you never thought would ever get here is getting here. Soon. You have dreamed about it. You play-acted it on your recent vacation. You saved for it. Maybe not enough, but hey, it's never enough, right?

But are you really ready to retire? If your financial advisor tells you that the money is sufficient, that's wonderful! But that alone does not make you ready. We call this the "King Midas" myth. You can certainly be excused if you believe it because we are all being battered with this myth by the financial services industry. I'm in this industry so I know of what I speak.

But if money were the answer, then why do 40% of retirees say they were happier when they were working? Retirement has not made 40% of them instantly poor. The problem is psychological. My friend and co-author, Alan Bernstein, is a psychotherapist and life coach in New York City with many clients who are rich but unhappy retirees in search of help.

Think of it this way. We spent years and years and tons of money (or at least our parents did) preparing for our careers. During our work life, we kept ourselves current in our professions to stay competitive. But now, when it comes to beginning a brand new phase of life, one that could potentially last another 25+ years, we just wing it. No preparation necessary. Grab the money and run.

But run where? What kind of a life awaits us? And how can we be sure that we will be creating a life that will make us satisfied, fulfilled, and, yes, happy? Because retirement is not a perpetual vacation. We call this the "Carnival Cruise" myth, and if you believe it, you are likely to be very disappointed.

So what should you do? Start by thinking differently about retirement. Forget about the finances and the perpetual vacation for a while, and put some quality time into thinking about the daily life you want to lead in retirement. Begin by remembering the times that you felt happiest in the course of your regular life, rather than when you were on vacation. Remember in particular the times when you felt an extreme sense of purpose, when you were so involved in what you were doing that you lost all sense of time. Psychologists call this at state of "flow." What were you doing? What were you accomplishing? Who were you with? What were the physical and social circumstances?

Now think about how you can recreate similar experiences in your retirement life. Write them down. Think also about those things you have always wanted to do (learn another language, read all the "great books," learn to play an instrument, etc.) but never had time to do. Add these in too. Also think about the overall context of your retirement. Where will you be living? Who will you be spending time with? What will you and your spouse be doing together? What will you be doing apart? Remember, we all need our personal space. Once you have thought about these questions, share them with those closest to you who will be part of your retirement life to make sure they are in agreement and supportive. You need their buy-in to make it all work. Modify your plans based on their feedback. By doing these things, you become your own "life coach."

Now you are ready to start adding in the details of what we call your "NewLife Plan." Put this plan in the context of your first two years of retirement. Think again about your daily life and routine, because that is what retirement is really all about. And make some initial estimates about what this is going to cost in comparison with what you are spending pre-retirement. (Hint: plan for at least 80% of your pre-retirement spending, or more, unless you are making a major move to a significantly less expensive part of the world.)

Now you are ready to meet with your financial advisor, and he/she will be able to provide you with a very valuable service. You can now share with him/her the details of your NewLife Plan and get help figuring out how to restructure your assets to support your new lifestyle. (Hint: in retirement, you will need to change the sources and uses of your income, so you are, in fact, developing for yourself a new financial strategy.)

And what if it doesn't all add up? Your financial advisor can help you make adjustments to your NewLife Plan to bring it into balance with your finances and the number of years your money will need to sustain you. The goal is two-fold: to have a happy retirement (because you have self-coached yourself psychologically to create a life that has you doing the things you love) and you have done your best to ensure that you don't run out of money before you run out of life.

And here's the ultimate incentive: studies show that happy people live longer!