Retirement: A Financial Decision or an Emotional Decision?

By LouAnn Schulfer, AWMA®, AIF® Accredited Wealth Management Advisor℠, Accredited Investment Fiduciary® |

What is the first thing that comes to mind when you hear the words “Retirement Planning”? For many people, a lot of questions arise. Can I retire early? How much money do I need? What is a reasonable distribution rate to determine the monthly income that can be produced from my nest egg? How long will my money last? How do I get the most out of social security? What about my pension? Should I wait, work longer and get a higher monthly amount? Should I choose a single or joint life option? If joint, which one? These are serious decisions to make because mistakes can be costly and some decisions, once made, are irrevocable. One would think that with all the mathematical equations that go into retirement planning, the decisions should be obvious and clear cut because math is absolute and objective.  Isn’t retirement planning all about mathematical financial decisions?  Not entirely. 


Our equations take a big subjective turn when we ponder questions like, how long will I live? How long will my husband or wife live, and how do I make sure he/she is financially taken care of? What will happen in the future with inflation, healthcare expenses and the like? How will my investments perform? Should my money be positioned differently once I retire? Will one of us need long term care? If so, how much will it cost? It’s always been interesting to me to know that while math is absolute, we work with it in the retirement planning world by applying probabilities and simulations addressing these subjective and emotional concerns because we do not know what our futures will bring. When the probabilities of success rise, these emotional anxieties often come down, clarifying the decision-making process.


What’s more, in my years of working with individuals and couples planning for and contemplating retirement, there is yet another and often deeper emotional layer which cannot be solved for with charts, graphs, simulations, probabilities and the finest financial planning software that an advisor’s money can buy. These are the profound concerns like, am I really ready to retire? Do I want a big life change? In many cases, we’ve spent our entire adult life building our career or our business. I know I have, and for me personally, the dedication of building my business has been like raising a third child. I look forward to my day’s agenda. I am gratified when I have been of value to others. I love working with our team! I like to keep mentally sharp. So, when I talk with people about retirement, I can relate to their emotional trepidations about this major lifestyle change. Many times, it is a feeling of ambivalence. On the one hand, there will be time to devote to personal projects, hobbies, and interests. On the other hand, leaving what you’ve spent a lifetime building is a big step.  Letting go of the income from your job or business can also be a cause for anxiety, especially when that means you will have to start taking from the nest egg that you’ve been building for decades.


If this describes you, my advice is to spend a just amount of time thinking through and talking about these considerations. Often, I’ve worked with people for a year or more mentally and emotionally preparing for the next chapter: retirement. As with any major decision in life, the better prepared you are, the more confident you will be moving forward into your new chapter. For the retirement chapter, it is both a financial and an emotional decision.