The Psychological Impact of Retirement

If you picture a carefree retiree walking on a beach or enjoying recreational activities after a long career, in good health, you might
think life can’t get much better. The scene is a universal goal — the culmination of a lifetime of hard work and smart choices.

Yet carefree and confident seniors represent an ideal of retirement far from what they anticipate will be true. Instead of golden
beaches and optimism, the reality is that many people have mixed emotions and anxiety about retirement. Others are less
confident and more financially vulnerable than these idealized images suggest.

The traditional pension plan that supported many individuals in retirement has, for most Americans, disappeared. Further,
structural factors in the economy related to population growth and productivity have resulted in what many believe will be a
prolonged period of very low interest rates — making income generation on a fixed retirement portfolio extremely difficult.

Advisors must recognize and understand the complex emotions and anxiety often felt by individuals approaching retirement. In
order to provide effective and differentiated service, they need to engage in aligned and purposeful conversation. The complicated
feelings of the transition from pre-retirement to actual retirement are real and represent more than just financial uncertainties.

In some cases, from a psychological perspective, retirement may involve losing one’s sense of purpose or self-worth. What happens
when the regular paychecks stop, time is in abundance and a new phase of life begins? For individuals who have worked their
whole lives, their sense of self or value may be tied to their jobs or their businesses. Likewise, their interpersonal relationships or
social networks may be depleted and no longer include much contact with the colleagues and customers they worked with. For
others, retirement is a stark reminder of mortality: the closing of a milestone chapter of life.

These frets, worries and concerns can have a serious negative effect: Decision paralysis. When wrestling with anxiety or intense
feelings about big issues like retirement, people often retreat from decisions. The default action becomes inaction, thereby
exacerbating problems even further.

For financial advisors, this means it’s time to identify and better understand some of the vital (and easily overlooked) financial and
psychological impacts of retirement. In doing so, they can help their clients through this phase, cope with complex feelings, make
adaptations and realize what they are going through is normal. With an understanding of these realities, advisors can be prepared
to share insights, guidance and wisdom, drive toward the goal of taking appropriate actions and easing their clients’ fears.
Detection and empathy means more holistic relationship-building and ultimately, guidance toward a more secure future.

Learn more about this important transition, and get actionable steps to help your members.

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