Why purpose is key to a happy retirement
As a self-described workaholic, “Rick”—a Newport client—had no intention of departing his successful retail business and making the transition into retirement. Quite the opposite, in fact.
“I worked all the time and didn’t have any hobbies,” he recalls. “I loved what I did and thought that I’d work well into my 70s.”
Many high net-worth Canadians—including both entrepreneurs and senior business leaders—find themselves in a similar position. Their work gives them purpose and finding a way to have a fruitful retirement can be a major challenge.
But Rick’s business-focused trajectory changed around the time he turned 60.
“Four people I knew really well died between the ages of 55 and 62,” he says. “I started thinking, ‘Maybe this isn’t a dress rehearsal, maybe I should think about retirement.’”
Carving out a new pastime
What Rick did next helped position himself for a successful golden-year transition: he found a rewarding hobby. A friend got him interested in woodworking and he progressed from entrepreneur to craft enthusiast within a year after he made the decision to sell his business.
Having an enjoyable new pastime helped the former entrepreneur find new meaning. He now sells some of his hardwood creations and gives others to friends and family as gifts.
“Having a sense of purpose is probably the key ingredient to retirement success,” explains David Lloyd, Newport’s Co-founder and Chief Wealth Management Officer. “The idea of ‘freedom 55,’ when you’re counting down the days until you stop working and that’s it—that doesn’t work.”
What does work is taking the time to strategically manage the transition. Putting purpose into your retirement is a process that takes time—and the sooner you start, the better.
A common challenge
Studies show that many wealthy individuals struggle in the months and years after calling it a career. Sometimes that’s due to boredom, while some former business owners or executives long to reclaim the exhilaration of their working years. After all, the structure and excitement of running or growing a business can be difficult to replicate in retirement.
Perhaps it’s no surprise, then, that approximately 30 to 40 per cent of retirees experience depression in the first two years after leaving work. According to the Canadian Psychological Association, older adults who experience depression are two to three times more likely to die prematurely than those who don’t, with depression constituting the primary suicide risk among seniors.
Emotional challenges and mental health issues can impact retirees financially, as well. Even wealthy individuals with significant assets can make inefficient or rash financial decisions if they find themselves depressed or generally unfulfilled in retirement.
“You may still have worries, setbacks, stresses that you need to deal with in retirement and that never goes away,” says Lloyd. “But high net-worth individuals who can reinvent themselves tend to be healthier and transition to retirement more successfully.”
Walk, don’t run
For some, taking a slow transition into retirement can help increase the chances of finding balance, happiness and establishing a clear new post-retirement identity.
In Lloyd’s experience, many business owners or leaders who make a slower transition out of their business find the change far easier to manage. That could mean gradually reducing their hours, retiring but then returning in a part-time consulting role, or even taking on a directorship position.
That was the case for Michael, a specialist physician and Newport client who was nearing retirement and had wound down his practice to a day or two a week prior to the pandemic. With COVID-19-related changes to the delivery of health care, he’s opted to fully retire in September – a choice a growing number of his colleagues are making.
He worked closely with his portfolio manager to determine his and his wife’s post-retirement cash flow needs based on their lifestyle goals—which in this case required about a 4 per cent rate of return on investments after inflation—and in the years leading up to retirement, adjusted both their spending and portfolio mix accordingly.
He plans to spend more time with his family and will continue customizing their new house as work winds down. “That’s going to keep me busy, and I also play sports and have built a gym in the house,” he says.
By retiring gradually, Michael was able to plan and set a clear roadmap for his retirement. For other business owners, the gradual approach also enables them to prepare an organizational succession plan or to train new management or ownership to take over.
Others find new purpose in areas such as philanthropy or social entrepreneurship, or even stewarding their wealth into the next generation by taking the time to ensure their heirs have the expertise to manage their inheritance before it’s passed along.
For example, Rick and his wife have enjoyed helping their children with everything from mortgage payments to paying for family trips, but ultimately plan to leave most of their estate to charity, having found joy in giving back in their retirement years.
Leverage your support network
You didn’t build or help run a business on your own, so why take a solopreneur approach to organizing your retirement? Lloyd says it’s crucial to build a team of trusted professionals, including friends and loved ones, to help you manage the retirement transition.
He advises speaking with peers and role models (namely, retirees who have been through the same process), advisors such as a trusted lawyer, accountant or portfolio manager, and anyone else in your network who may be able to provide valuable insights and support.
“We often help our clients nearing retirement, occasionally referring them to other professionals such as psychologists or life coaches to help them articulate their new objectives or goals. Maybe they want to be more philanthropic, so we help them figure out how to do that.”
An approach built on purpose
In some cases, that’s helping to point out potential pitfalls. Lloyd says that many former entrepreneurs will try to re-enter the business world either by building or acquiring a new business, only to find that it’s not the right fit. Many fail the second time around and find themselves both disillusioned and financially worse off because of it.
His advice is to find an entirely new sense of purpose: “Tune into what your passion is. Be as curious in retirement as you were in business.”
The tragic, early loss of close friends and a simple interaction at his store helped eventually point Rick towards a very fulfilling retirement.
“A customer visited me at the store one day and said he was a workaholic at 60, but developed a hobby,” Rick remembers. “He had planned to retire at 68, but left work at 64 because it was getting in the way of his passion. It reminded me that you can only buy so many trips or cars, but you can’t buy time.”
Subscribe to Our Views