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Have you invested in the psychological portfolio for retirement?

MarketWatch logo MarketWatch 3/5/2021 Alessandra Malito
a man standing in front of a mountain © Getty Images

Money management is a crucial component of retirement planning, but it’s not the only important part — knowing what you want to do in this next chapter, and how you’ll respond to lifestyle adjustments, is a key factor in having a healthy retirement. 

Enter the ‘psychological’ portfolio, a combination of identity, relationships and purpose. Along with having the right amount of assets in retirement to live comfortably, an individual should plan for what they’ll do in retirement and how they’ll interact with others, Nancy Schlossberg, author of “Too Young to Be Old: Love, Learn, Work and Play As You Age,” said during a MarketWatch live personal finance event called “Mastering Your Money: Planning Ahead.” 

“You have your identity so tied to work, when you are no longer working, who are you?” Schlossberg said. She came up with the ‘six types of retirees’ to define the various paths a person can take in retirement. These six profiles include: the adventurer, who takes on a new job she’s never done before; the continuer, who works in a similar fashion prior to retirement; the easy glider, who takes retirement day by day; the involved spectator, who wants to be immersed in a field without making it a full-time job; the searcher, who isn’t yet sure of what to do next; and the retreater, who can’t figure out what to do. “When you are on a path, you begin to get a new identity.”

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Finding purpose will help a person find their identity, she said. Alongside this mission, however, is striking a balance in interacting with spouses, children and friends. Retirement can bring a new sense of challenges to an individual, who may not be accustomed to spending nearly every hour with their significant other, or who is expected to babysit now that they no longer have to report to work, she said. 

Howard Gold, a MarketWatch columnist, suggests writing a “mission statement” for your retirement, which would list life goals — taking up a new hobby, going to a long-desired vacation destination or engaging in volunteer work for example. “But it could also mean thinking deeply about what your life has meant and making retirement its capstone,” he wrote

Of course, finances are a critical aspect of retirement planning — without a financial plan, a retiree may spend too much or little in retirement, or not have the opportunity to accomplish these life goals. But the two components — financial and psychological planning — must coincide for retirement to be successful, said Marty Kurtz, founder of The Planning Center, a Certified Financial Planner and a recent retiree who participated in the MarketWatch panel with Schlossberg. “Do we have a good view of reality and do we understand what our expectations are?” he said. “It is not just about the money, it is about money and life and how do they work together?” 

Also see: I’m a 74-year-old widower in a five-bedroom house just making monthly payments and no retirement nest egg — should I sell or rent out my home?

To achieve this success, retirees should understand the household’s cash flow — know where money is going, why it’s going there and if that’s aligned with their goals. Families should also talk to each other about spending and saving, discuss what they want their retirements to look like or consider working with a trustworthy professional to make the most of this next stage.“It is really important for us all to understand retirement planning is a little bit about investment planning, but not very much,” Kurtz said. “It is really about happiness. How do we find happiness in our life? Which is a goal for a 30-year-old, 70-year-old or 90-year-old.”

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