About half of life’s most stressful events are likely to happen to us either at or during retirement, making the concept of a ‘stress-free’ retirement somewhat of a misnomer. In 1960, psychiatrists Holmes and Rahe published a list of the 43 most stressful life events known as the Social Readjustment Rating Scale (SRRS). This tool was designed to help people measure the stress load that they carry and understand the stressors in their lives. What they found is that our ability to cope with stress is relative to what is happening in our lives at the same time. For instance, moving to a new home can be an exciting experience if all else remains stable and positive in our lives. However, moving to a retirement home coupled with the diagnosis of a major illness, the loss of a spouse or severe financial stress can be a hugely traumatic experience with far-reaching repercussions.
Interestingly, of the list of 43 most stressful life events, many of them are linked to health and finance, and include illness, death of a spouse, moving home, disability, change in financial position, divorce, retrenchment, retirement, death of a close friend, children leaving home, starting a new business and a change in living conditions. Given the retirement crisis facing South Africa and the fact that only 6% of South Africans can afford to retire without compromising their current standard of living, it is inevitable that most South Africans are destined to experience financial stress during their retirement years.
According to the 2018 10X retirement report, 62% of South Africans are not confident they will be able to draw a retirement income, 62% have no form of retirement plan whatsoever, and 53% of investors have no idea what their pension fund is worth. Only 22% of those surveyed indicated they had started saving at the beginning of their careers, while 74% acknowledged they had started saving too late. However, financial security in retirement is only one of a number of aspects that needs to be considered. With retirees living longer than ever before, there is more interest and research into the quality of retirement and the stressors that retirees face during their co-called golden years.
Besides for financial stress, there are huge psychological repercussions associated with the transition into retirement, including partial identity disruption, diminished self-trust, post-retirement void and death anxiety. Many retirees also attest to feeling overwhelmed by the number of choices to be made when they begin retirement, which can lead to analysis paralysis. Further, some retirees experience lack of confidence which causes them to distrust their ability to make the right choices. Death anxiety is a real retirement fear, especially as many retirees feel as though they are entering the last phase of life. This can cause anxiety and depression which, in turn, can manifest in the form of other illnesses.
Let’s have a look at the top 5 stressors facing retirees and how to deal with them in the context of financial planning:
- Death of a spouse
The death of a spouse is ranked as the number one stressor on the stress index scale and is considered one of life’s most devastating events. As women have a longer life expectancy than men, it is only natural that the majority of widowed retirees are female. In fact, in the United States almost half of the women over 65 are widowed and 70% of them live alone. Spousal bereavement can cause chronic stress and depression for the surviving spouse which, in turn, can impact on life expectancy. Besides for the loss of support and companionship, the death of a spouse inevitably has financial implications which can create added stress for the surviving spouse. Research shows that 20% of all women will, at some stage in their lives, find themselves solely responsible for the household finances – and this very often happens in their retirement years.
Planning for the death of a spouse: Comprehensive financial planning should include estate planning and end-of-life planning, especially as you age. In the first instance, it is advisable to know where each of your wills are kept and who the appointed Executors are. Talk openly with each other about funeral and burial arrangements and, if necessary, document your desires in a ‘letter of wishes’. Be sure to make your loved ones and medical practitioner aware of your living will or your intention to be an organ donor. Funerals can be particularly expensive and it is advisable to be aware of any funeral cover that may exist. Knowing what happens to your spouse’s estate in the event of death is essential as it is affected by your marital regime. Most professional financial planning practices encourage a joint planning process to ensure that both partners fully understand their financial situation in the event of one partner passing.
- Major personal illness
Arthritis, cancer, heart disease, dementia, diabetes and depression are amongst the most common chronic ailments afflicting those over the age of 65. According to the Centres for Disease Control and Prevention, 49.7% of people over 65 suffer from arthritis which is the number one condition affecting the elderly and which can dramatically impact on their quality of life. Heart disease affects 37% of men and 26% of women over the age of 65, while cancer is the second leading cause of death amongst people over 65, affecting 28% of men and 21% of women. Over 7% of people over the age of 65 have been diagnosed with some form of dementia, although it is believed that the vast majority of dementia sufferers have yet to be diagnosed. The American Psychological Association reports that between 15% and 20% of Americans over age 65 have experienced depression which, in turn, can lower immunity and compromise a person’s ability to fight infections. The likelihood of either you or your loved one being diagnosed with a major illness after the age of 65 is great, making comprehensive healthcare cover a must-have benefit.
Planning for illness in retirement: We cannot stress enough the importance of retaining comprehensive medical aid cover in retirement as healthcare costs are very likely to escalate during this life stage. Ensure that you understand what conditions are covered by the prescribed minimum benefits, your medical aid’s chronic condition benefit and any disability or severe illness cover that you may have in place. Your financial advisor should be able to assist you with the claims process in respect of these benefits, including claiming from your gap cover insurer in the event of hospitalisation. Any change in health status should necessitate a review of your financial plan. Depending on the diagnosis and subsequent prognosis, work with your financial advisor to budget effectively for the costs of treatment, rehabilitation and possibly long-term care.
- Retirement from work
The act of retiring from work is ranked the 10th most stressful life event which can have major psychological and emotional repercussions. Disengagement from work life and the subsequent transition to a retirement lifestyle can lead to ill-health, depression and anxiety. In particular, many people suffer from identity issues when leaving the work place – having always previously defined themselves in terms of their profession. Many retirees who enjoyed their professional careers attest to grieving for their careers and feeling isolated after retirement. In addition, retirement farewells often make retirees feel as though they are being disposed of and no longer have value. Entering formal retirement often feels like entering the final phase of existence which can cause depression and anxiety about death. If not planned for appropriately, retirement can be a hugely traumatic event with far-reaching physical, emotional and psychological consequences.
Retirement planning advice: Retirement planning is an all-encompassing process which includes takes into account the financial, logistical, emotional, social and psychological aspects of your planned retirement. Begin planning your retirement at least five years in advance so that, together with your financial planner, you can put plans in place to soften, and possibly graduate, the actual retirement transition. Rather than a single retirement event, many retirees opt to reduce work hours over a period of a few years, take a leave of absence to give retirement a ‘trial run’, or negotiate contract work to allow them more flexibility while still remaining professionally engaged. Having life goals that extend beyond your planned retirement date is essential for an emotionally smoother transition into the next stage of life. Aspects of your former life structure which were once peripheral – such as hobbies, exercise and charity work – may become more central during retirement. On the other hand, spending time with colleagues, being intellectually engaged in your work and chasing deadlines will no longer form part of your life. The effect of these changes must not be underestimated, and our advice is to partner with an advisor who has experience in retirement planning.
- Major financial changes
The years leading up to retirement are dedicated to accumulating your personal wealth. You are earning, saving, investing and building a comfortable nest egg for the future. At retirement, this financial strategy is inverted, and you effectively begin drawing from your pot of money. The mental shift from building wealth to spending wealth is a significant one and can be a source of anxiety. With only 6% of South Africans being in a position to retire comfortably, most people will need to curtail their lifestyles after retirement. Many retirees struggle with the shift from receiving a regular salary and payslip to drawing a fixed income from their retirement funds. This shift often requires managing income from various sources such as living annuities, rental income and discretionary investments, which often makes financial management more demanding in retirement.
Advice for effective financial management in retirement: Understanding the tax implications, CGT and intricacies of retirement fund legislation generally requires expert advice. Prior to retirement, it is essential to meet with your financial planner to ensure your investment are structured in the most tax-efficient and cost-effective manner. Finding the optimal balance between drawing from your various investments is key to securing your cashflow and ensuring you do not outlive your capital.
- Moving home
Although moving home is only ranked 32 on the stress index scale, moving from the family home to a retirement home or assisted living facility can be a hugely traumatic event. In fact, relocation stress syndrome (RSS) is a recognised diagnosis which often occurs when the elderly transition from a private residence to a care facility – and is characterised by symptoms such as anxiety, confusion, hopelessness, loneliness and grief. Seniors tend to associate moving out of their home with a loss of control and freedom and, as a result, tend to avoid making the decision until it is too late. Delaying the decision to move into a more appropriate retirement facility can put untold pressure on the adult children and cause tension among family members.
Advice for retirement home planning: Although moving to a retirement home or facility can have negative connotations, there are in fact many benefits to such a move. Besides for the care facilities, security and social aspects of a retirement home, right-sizing your retirement accommodation can free you up mentally and physically to enjoy your time more. Many elderly people attest to feeling overwhelmed by the maintenance, upkeep and responsibility of running a home and feel an enormous sense of relief when moving to smaller, more self-contained accommodation. Key to planning your future retirement accommodation is to keep an open mind about your options. There is no way of knowing what the future holds for you and your partner in respect of your health and life expectancy. While moving to a retirement home may not be first-prize in terms of your retirement goals, circumstances may require you to consider this as an option. Effective retirement planning means planning and budgeting for all eventualities in preparation for life’s possible curve balls. If selling your primary residence and moving into a retirement home becomes necessary, avoid putting off the move unnecessarily. It is advisable to undertake a major lifestyle adjustment such as this while you are still mentally and physically strong enough to cope with the change.
Sugar-coating retirement as a stress-free life stage will only lead to disappointment and unmet expectations. Instead, develop a retirement plan that makes provision for the likelihood of these common stressors in order to create a level of both mental and financial preparedness when retirement arrives. Avoid being side-swiped by the inevitable stressors that come hand-in-hand with aging, retirement and changes in daily habit. Failing to plan for retirement is planning to fail.
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