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How to deal with retirement transition struggles

March 31, 2019

This May, Simply Money Advisors is becoming Allworth Financial. As we expand our services to better meet your retirement planning needs, we needed a name that encompasses all that we are.  Don’t worry. We’ll still deliver our same no-nonsense money advice every week in the Simply Money column, presented by Allworth Financial.

 

Jake in Ripley: My dad seems to be struggling with his recent transition into retirement. He just doesn’t seem happy. Any suggestions for how to help him? 

Answer: We’ve definitely seen this happen before. And it’s not surprising. After all, most people’s identity is tied to their job (Think about it: The first question you ask when you meet someone new is, “What do you do?”). It can be mentally challenging to adjust to a new stage in life that doesn’t revolve around work. On top of that, retirement has a way of shaking a 40-year routine to its core: one day you get up at 6 a.m. to head to the office, the next day you don’t. 

One small way to help your father is to make sure he has a new daily routine. If he’s drifting from day-to-day without much of an agenda, it could be making him unhappy. This could be as simple as determining a set time to wake-up, a set time to eat breakfast, a set time to read the news, etc.  

How’s your dad’s social circle? If he’s the first of his friends to retire, he might feel isolated or as though he doesn’t ‘fit in’ anymore. Plus, while he’s hanging around the house during the day, his buddies are at work. If he has a few acquaintances who also happen to be retired, can he create deeper friendships with them? On the other hand, if his close friends are also retired, he should lean on their experiences to help him through what he’s feeling. 

Bigger picture, it sounds like your father may need help finding a new sense of purpose. Does he have a hobby he enjoys? Maybe a charitable cause that’s near and dear to his heart? Does he want to learn a new skill? What about traveling? He needs to have something in his life that motivates him day in and day out. It could even make sense for him to start working part-time in some capacity. 

The Simply Money Point is that change is uncomfortable for most people. Retirement is no exception. The key to a successful transition lies in having a strong sense of self, along with well-defined goals.

 

Nicholas and Amelia from Springfield Township: We’ve reworked our budget so we’ll max out our 401(k)s and IRAs this year. Is there anything else we can do to save for retirement? 

Answer: First off, congratulations! In 2017, just 13 percent of workers with a 401(k) maxed out the account according to Vanguard. And the two of you are even going above and beyond by also maxing out your IRAs. You should be very proud. 

If you still have money to put aside (which it sounds like you do), an emergency fund should be a top priority. We recommend it covers three to six months’ worth of critical living expenses. 

Assuming you already have an emergency fund in place, there are two other types of accounts to consider: a Health Savings Account and a taxable investment account. 

A taxable investment account is an important option. An example is an index mutual fund you might open with a brokerage firm, such as Vanguard, Fidelity, or TDAmeritrade. There are no contribution limits, income limits, or age limits. It can be accessed any time for any reason. No penalties for withdrawals, either. And since this is after-tax money, only the gains (if any) will be taxed at your capital gains tax rate (which has historically been more favorable than ordinary income tax rates). 

You may also want to consider a Health Savings Account (HSA), which is a tax-advantaged way to save for future healthcare expenses. Contributions are either tax deductible or pre-tax, the account grows tax-free, and money can be withdrawn tax-free for qualified medical expenses. For 2019, you can contribute up to $7,000 if you have family healthcare coverage ($8,000 if you’re age 50 or older). However, you must be enrolled in a qualified high-deductible healthcare plan to have an HSA. 

Here’s The Simply Money Point: While 401(k)s and IRAs are probably the most well-known ways to save for retirement, they’re not the only ways. Keep up the good work!

 

Responses are for informational purposes only and individuals should consider whether any general recommendation in these responses are suitable for their particular circumstances based on investment objectives, financial situation and needs. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing, including a tax advisor and/or attorney. Nathan Bachrach and his team offer financial planning services through Simply Money Advisors, a SEC Registered Investment Advisor. Call (513) 469-7500 or email simplymoney@simplymoneyadvisors.com.

Retirement