Are You Mentally and Emotionally Ready to Retire?

By:  Paul Horn, CFP®, CPWA®, Senior Financial Planner

Most people look forward to the day that they can have independence and no longer have to work 9 – 5. In my experience, while everyone wants to retire, most are truly not ready to retire. I am not referring to having the financial ability to retire but most are not emotionally ready for retirement. Retiring before you are emotionally ready often leads to feelings of sadness and not feeling fulfilled. As a result, many people will return to work since they were not ready. This is especially true with individuals that retire early.

With any major transition in life, it takes time to prepare emotionally and become comfortable with the new reality. Major changes are difficult and below are some things to consider helping gauge how emotionally prepared you are for retirement.

Why do you want to retire?

Retirement is more than just watching tv or sitting in a rocking chair waiting for the Grim Reaper to arrive. Retirement is about pursuing passions and finally having the time to do the things that you want to do. For many retirees is about traveling, time with friends and family, or other passions like golf or charitable work. If you want to retire because of a bad job situation or are feeling burned out, then you may not be ready to retire. Remember that retirement does not have to be an all or nothing proposition. Many people will move to part-time work or a less stressful job to help ease them into retirement.

Visualize your retirement.

This is similar to the first question but an important step. What do you see yourself doing in retirement?  Take some time to daydream about the things you want to do in retirement. Allow your mind to wander and no idea is too crazy. This is a time to experiment and really let down your guard. I had a couple that retired and never owned an animal. They decided they wanted a dog and chose the breed. One thing led to another, and their retirement became traveling the country doing dog shows and becoming well-respected breeders. For another client, this was simply being able to go out to breakfast with her husband or friends daily and having time to be more involved in her church. Whatever retirement looks like for you should energize you and get you excited.

Write it down

Studies have shown that you are far more likely to accomplish a goal if you write it down. Take the time to write down the timeline and steps you want to take to retire. If you want to travel, then begin to plan out your first trip and develop an itinerary. By writing it down you can come back and look at this if you feel overwhelmed or unsure about retirement.

Be patient and have realistic expectations

Retirement is a major life event and for most is a difficult transition. Your habits will need to change to adjust to retirement and for most people, this transition is slow and takes about six to twelve months. The important thing during this time is to be patient with yourself and allow yourself some time to find fulfillment and meaning. Begin with small tweaks and experiment with different habits to find what brings you the most satisfaction. During this transition make sure to communicate challenges or difficulties with a friend or family member. Just communicating your emotions can help you feel better about the transition.

Give your retirement a dry run

As clients get closer to retirement, I strongly encourage them to begin some of the things that they are planning for in retirement. If you plan on travel, take some time off before you retire and take some smaller trips to make sure you are happy with the lifestyle and decision you are making. If you are considering a major purchase like a boat or RV, then rent one on the weekends and make sure you enjoy it before making the purchase. Starting some of these habits before retirement will make the transition easier and allows you to experiment without repercussions. If you are concerned about retiring, then take the process slowly by working part-time or in a less stressful job and make the transition to retirement when you are good and ready.

Being mentally and emotionally prepared for retirement is one of the biggest topics that people forget to discuss before retirement. If you do not know where to start or would like to talk with us, you can reach us at financialplanning@bfsg.com.

Disclosure: BFSG does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to BFSG’s website or blog or incorporated herein and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please remember that different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment or investment strategy (including those undertaken or recommended by Company), will be profitable or equal any historical performance level(s). Please see important disclosure information here.

Upcoming Webinar (July 26th): Retirement Plan Basics

Learn how to prepare for retirement by learning the basics of your retirement plan. Why save in your retirement plan? How to invest in your retirement plan? What to do with your retirement plan after you retire? Get these questions answered and more.

Come join the conversation with Tina Schackman, CFA®, CFP® and Keith Johnson, CFP® of BFSG.

Register today for this important discussion! Click here to register.

Back to School: Financial Literacy Tips

As your high school and college-age kids head back to school, equip them with the tools they need to take charge of their financial lives! This starts with getting your kids to understand how to manage their finances such as the basics of budgeting, making saving a priority, understanding debt and their credit score, learning about investments and taxes. Watch with the links below:

Connecting The Dots to Your Financial Future (Part 1): Budgeting & Saving, Understanding Debt & Credit

Connecting The Dots to Your Financial Future (Part 2): Creating Healthy Financial Habits, Investing

A Definitive Guide for Education Planning: Understanding Student Loans, Tips to Maximize Student Aid

Visit our YouTube Channel for more educational content.

Disclosure: BFSG does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to BFSG’s web site or blog or incorporated herein and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please see important disclosure information here.

Understanding Your Credit Report

Your credit report contains information about your past and present credit transactions. It’s used primarily by potential lenders to evaluate your creditworthiness. So, if you’re about to apply for credit, especially for something significant like a mortgage, you’ll want to get and review a copy of your credit report.

Getting A Copy Of Your Credit Report

Every consumer is entitled to a free credit report every 12 months from each of the three credit bureaus: Experian,TransUnion, and Equifax. Besides the annual report, you are also entitled to a free report under the following circumstances:

  • A company has taken adverse action against you, such as denying you credit, insurance, or employment (you must request a copy within 60 days of the adverse action)
  • You’re unemployed and plan to look for a job within the next 60 days
  • You’re on welfare
  • Your report is inaccurate because of fraud, including identity theft

Visit www.annualcreditreport.com for more information.

What’s It All About?

Your credit report usually starts off with your personal information: your name, address, Social Security number, telephone number, employer, past address and past employer, and (if applicable) your spouse’s name. Check this information for accuracy; if any of it is wrong, correct it with the credit bureau that issued the report.

The bulk of the information in your credit report is account information. For each creditor, you will find the lender’s name, account number, and type of account; the opening date, high balance, present balance, loan terms, and your payment history; and the current status of the account. You will also see status indicators that provide information about your payment performance over the past 12 to 24 months. They will show whether the account is or has been past due, and if past due, they will show how far (e.g., 30 days, 60 days). They will also indicate charge-offs or repossessions. Because credit bureaus collect information from courthouse and registry records, you may find notations of bankruptcies, tax liens, judgments, or even criminal proceedings in your file.

At the end of your credit report, you will find notations on who has requested your information in the past 24 months. When you apply for credit, the lender requests your credit report–that will show up as an inquiry. Other inquiries indicate that your name has been included in a creditor’s prescreen program. If so, you will probably get a credit card offer in the mail.

You may be surprised at how many accounts show up on your report. If you find inactive accounts (e.g., a retailer you no longer do business with), you should contact the credit card company, close the account, and ask for a letter confirming that the account was closed at the customer’s request.

Basing The Future On The Past

What all this information means in terms of your creditworthiness depends on the lender’s criteria. Generally speaking, a lender feels safer assuming that you can be trusted to make timely monthly payments against your debts in the future if you have always done so in the past. A history of late payments or bad debts will hurt you. Based on your track record, a new lender is likely to turn you down for credit or extend it to you at a higher interest rate if your credit report indicates that you are a poor risk.

Too many inquiries on your credit report in a short time can also make lenders suspicious. Loan officers may assume that you are being turned down repeatedly for credit or that you are up to something–going on a shopping spree, financing a bad habit, or borrowing to pay off other debts. Either way, the lenders may not want to take a chance on you.

Your credit report may also indicate that you have good credit, but not enough of it. For instance, if you are applying for a car loan, the lender may be reviewing your credit report to determine if you’re capable of handling monthly payments over a period of years. The lender sees that you have always paid your charge cards on time, but your total balances due and monthly payments have been small. Because the lender cannot predict from this information whether you’ll be able to handle a regular car payment, your loan is approved only on the condition that you supply an acceptable cosigner.

Correcting Errors On Your Credit Report

Under federal and some state laws, you have a right to dispute incorrect or misleading information on your credit report. Typically, you will receive with your report either a form to complete or a telephone number to call about the information that you wish to dispute. Once the credit bureau receives your request, it generally has 30 days to complete a reinvestigation by checking any item you dispute with the party that submitted it. One of four things should then happen:

  • The credit bureau reinvestigates, the party submitting the information agrees it’s incorrect, and the information is corrected
  • The credit bureau reinvestigates, the party submitting the information maintains it’s correct, and your credit report goes unchanged
  • The credit bureau doesn’t reinvestigate, and so the disputed information must be removed from your report
  • The credit bureau reinvestigates, but the party submitting the information doesn’t respond, and so the disputed information must be removed from your report

You should be provided with a report on the reinvestigation within five days of its conclusion. If the reinvestigation resulted in a change to your credit report, you should also get an updated copy.

You have the right to add to your credit report a statement of 100 words or less that explains your side of the story with respect to any disputed but unchanged information. A summary of your statement will go out with every copy of your credit report in the future, and you can have the statement sent to anyone who has gotten your credit report in the past six months. Unfortunately, though, this may not help you much–creditors often ignore or dismiss these statements.

In case you missed it, check out “Connecting the Dots to Your Financial Future (Part 1)” where we talk about why good credit is so important, how your credit score determined, and other tips.

Prepared by Broadridge Advisor Solutions. Copyright 2021. Edited by BFSG, LLC.

Disclosure: BFSG does not make any representations or warranties as to the accuracy, timeliness, suitability, completeness, or relevance of any information prepared by any unaffiliated third party, whether linked to BFSG’s web site or blog or incorporated herein and takes no responsibility for any such content. All such information is provided solely for convenience purposes only and all users thereof should be guided accordingly. Please see important disclosure information here.

5 Steps to Financial Freedom

The 4th of July is fast approaching and is a celebration of our country’s independence. It should also serve as a reminder to all of us the freedom we have and strive for. This would include trying to achieve financial independence. Financial independence can be hard to define since these words conjure different meanings for each of us. No matter your personal definition, there are some basic tenants that are important to achieve financial independence.

1. Spend less than you earn

It is impossible to have financial freedom if you are spending more than you earn. To be on the path to financial independence it is important to have a plan and stick to it. This seems obvious but it is surprising how many people do not practice this. For the most part no debt is good debt. Some debt is beneficial to help you move forward in life, namely school loans and mortgage debt. But the reality is the lower the debt you have, the easier it is to live the lifestyle you want.

2. Save and Invest Regularly

We know life happens and it is important to have an emergency fund for life’s unexpected turns, as this year has shown. Your emergency fund is the most important place to save and try to keep 3 to 6 months’ worth of living expenses in savings. Investing on a regular basis is the best way to achieve financial independence over time.  

3. Always be learning

So many people become complacent in life. There is a strong correlation with wealth and education and reading. Individuals that continue to be students in life and continually learn and grow their skillset typically are on the path for financial independence.

4. Take care of yourself

It is important to take care of your mental and physical health. Prevention is the best medicine and taking care of yourself physically and mentally reduces stress, anxiety and increases your mood and performance.

5. Have patience Financial independence does not happen overnight unless you win the lottery. Since winning the lottery is not sound financial advice the best way to achieve financial independence is to be consistent and intentional over a longer period. Remember you run a marathon one step at a time, one mile at a time.