7 Reasons People Don’t Retire Even If They Can Afford To

Introduction

The psychology of retirement is so important and affects people in many different ways. I’ve worked with clients who have already achieved financial independence and can easily afford to retire yet they are hesitant to give up work.

It is important to remember that financial independence doesn’t automatically mean retirement, it means that a person has the freedom to choose to work because they want to and not because they have to.

So let’s look at some of the reasons why a person might postpone retirement.

#1 – A Negative Association with the Word ‘Retirement’.

For some people, the word ‘retirement’ conjures up negative images of growing old and being put out to pasture and that by retiring they are somehow signifying the end of their working lives which they equate with usefulness.

Some people may have seen negative things happen to friends and family in retirement, for example, the relative who passed away shortly after they retired and they fear this happening to them.

#2 – Nothing To Retire To

Work often provides people with a sense of purpose and by giving up work they fear they will have nothing else to do. Those people who haven’t planned what their retirement might look like may equate retirement with boredom.

#3 – The Loss of Earning Power

This is the fear that if something were to go wrong with their finances, for example a fall in investment markets, the person wouldn’t have the ability to return to work and earn what they were earning before retirement in order to weather the storm.

#4 – Economic Anxiety

Some people equate their ability to retire to the strength or weakness of the wider economy. When the economy is strong and markets are high, they feel financially confident. These people may put off retirement if they perceive an economic downturn is imminent.

#5 – Focus

It is surprising how many people say that retirement came around too quickly and that they hadn’t fully prepared for it. It is easy to be so absorbed with work that planning for retirement takes a back seat. Sometimes people need an extra year or two just to focus on what retirement may look like for them.

#6 – Financial Cushion

Despite being financially independent some people like having an additional financial cushion. This can be the case for high earners who will look to work an extra year or two in order to build up an even bigger financial cushion. The problem with this strategy is that, if the financial cushion isn’t quantifiable, one or two years can turn into three, four or even five years.

#7 – They Absolutely Love What They Do

Some people love their work and the thought of not doing it fills them with dread. Often a degree of compromise is needed with a spouse or loved one to ensure that their goals are also achieved especially if the person is intending to work well into their seventies or even beyond.

How do we Assess Financial Independence?

We use sophisticated financial planning software to provide a lifetime cashflow forecast. We use conservative assumptions and take into account a client’s income and expenditure, their assets and liabilities as well as any one-off expenditure items to assess whether they have enough saved to achieve financial independence.

We can then take into account any financial goals as well as model different scenarios reflecting, say, a market down-turn or working for longer or retiring earlier. Our aim is to provide peace of mind that a client has achieved financial independence whatever the situation.

Conclusion

At various points during a person’s career, the thought of retirement can seem extremely attractive especially at busy or stressful times. However, as people approach their anticipated retirement age and especially in professions where there is some flexibility around retirement, it is not uncommon for people to want to work for ‘just one more year’!

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