By Scott Sarber

Many people come into our office to prepare for retirement. We talk about when they are anticipating retirement and what their goals are. We review assets, liabilities and current cash flow.

Through our financial planning process, we estimate future net worth and future cash flow. We let them know if they are on track for retirement, or if they need to make adjustments to get on track. After the process, they are generally comfortable with the results, make recommended changes and leave knowing they have a plan.

Scott Sarber

As the retirement date gets closer, the feeling of stress and anxiety increases because of the decision to retire, or not. A 2015 study of retired baby boomers indicated 63 percent of respondents felt stressed about retirement leading up to the decision and 25 percent said they still feel stress after being retired for some time.

Some clients have postponed the decision, even though they could meet their financial goals. Psychologically, it is a big step that cannot be taken lightly. After working hard to save for so long, it can be a mental challenge to think savings will stop once the employer turns off automatic payroll deposits.

In fact, the opposite occurs when spending commences from hard earned retirement accounts. An abrupt change from being an “accumulator” to a “spender” is not something most people emotionally process before submitting their retirement paperwork.

Seeing how distributions may reduce retirement accounts, especially when investments decline in value, can be scary. We have found that it may take up to a year or two to fully adjust to the financial mindset of retirement.

Business owners have an especially difficult time with retiring. The business owner may not have a succession plan to take over the business. The business may not have the enterprise value the owner had anticipated. Personal pride and other emotions tied to the business make the thought of retiring difficult. The business has been their baby. The employees and customers are their network, and if they left it all behind, they could lose a piece of their identity.

Steve Jobs, Michael Dell and Charles Schwab are good examples of entrepreneurs who turned their companies over to others, only to take control again because of the strong emotional and financial ties to the company.

The financial calculations for retirement can be fairly easy — to the qualified practitioner. As financial planners, we are adept at calculating cash flows, expected rates of return, impact from inflation and the present and future values of income streams. The math is the straightforward part of what we do. Helping people achieve their goals, actually deciding to leave the work force and processing the emotions of the transition are the real challenges. This entails discussing what retirement looks like well in advance, so when the time comes they are emotionally prepared.

For business owners, it is talking about a succession plan and describing what life looks like if they are not involved in the day-to-day activities of the business. There are many succession strategies. I have seen owners walk away from the business and simply close the doors, hand it off to qualified employees, sell to publicly listed companies and everything in between.

The important thing is to come up with a plan that aligns with personal and company values and start working toward it. The plan might change along the way, but at least there is a direction the efforts are heading. A successful strategy I have seen is when the business owner transfers ownership but continues to work for the company at an increasingly reduced rate. This slow-glide path seems to prepare business owners really well for the emotional transition to retirement.

The reality is we are all getting older. A lot of time is spent on the financial aspects of retirement. I suggest spending some time preparing emotionally for retirement as well. A quick internet search for “psychology of retirement” will bring up many resources. Of course, talking to your trusted financial advisor about it will help as well.

Scott Sarber is president of Petersen Hastings, a registered investment advisory firm in Kennewick.