As my retirement date drew closer, I contemplated a future without my paycheck which not only provided financial means but also symbolized that I was valued, independent, productive, and “in the game”. My comfortable, predictable life was about to change big time!
When it came to my future spending, my expectation was that it would be slightly lower. I reached this conclusion based my retirement plan and budget. I factored in lifestyle changes including relocation from California to Arizona.
When it came to the emotional impact of the loss of my paycheck, I was on less firm footing. It’s easier for me to deal with quantifiable effects than qualitative ones. My expectation in this area was that I faced an uncertain, unclear future.
In the first two years of retirement, I spent very conservatively because I had no track record to rely on and I had to get used to “paying myself”.
The mental adjustment was more difficult especially once the honeymoon phase ended. Two years in and I was still unsettled mentally. I hadn’t adjusted.
In the first two years, I spent 8% less overall which matched my expectation. Spending for non-discretionary items decreased by 32% while discretionary spending increased by 28%. Lower taxes drove the decrease in my non-discretionary spending and travel led to the increase in discretionary spending. Over that time my confidence grew because I developed a track record and I was fortunate to retire during a time when markets were growing (I avoided the sequence of returns risk).
From the emotional side, I eventually graduated to what I call Retirement 2.0. It was a difficult and painful process but one that I eventually learned is not that uncommon. You can read more about my experience in The 6 Stages of Retirement.
Retirement is considered a top 10 disruptive life event. The loss of a paycheck definitely contributes to that disruption and it induces fear, uncertainty and doubt.
I found it easier to anticipate and adjust to the financial aspects of losing my paycheck. I was able to plan for multiple scenarios and adjust my spending in order to meet my plan goals.
I was not surprised that it was more difficult for me to adjust to the emotional disruption of losing of my paycheck. But I was surprised by how long it took me to figure it out. I wish I had known more about what types of challenges I would face (such as what’s depicted in The 6 Stages of Retirement). Perhaps I would have prepared better or at least not have felt like I was the only one messing up retirement.
I invite you to share your expectations and experience of dealing with the loss of your paycheck.
Please share my experience with your colleagues and friends via Twitter, Facebook and email. Thank you!