Read on — even the retirement advisors might learn something.
If you have been reading BeyondWork, you may recall that we have covered a range of themes from the emotional shock of stepping off the work treadmill, to imagining our future lifestyle, to running the numbers, to exploring how our social networks evolve, to even wrestling with the new world of AI-tech that promises to help (or confuse) us along the way.
Each post has touched a different part of the retirement enigma — but retirement is not an event; it is a transition, a road less travelled …
ADAPTABILITY
Here is the thing: we do not know how long we’ll live [1], whether our savings will last [2], or how our interests will change [3] — and change they will. The only certainty is uncertainty, which is why flexibility becomes our strongest retirement skill.
Those of us who feel that we can ‘design’ a fixed retirement plan, or those (OCD guys like ‘moi’) who think they can control the road-map, may be in for a surprise.
So, what is the trick? Be like the trees on Table Mountain, Cape Town — bend with the wind. I really like this metaphor because, to be able to flex in the wind, you need something that keeps you grounded — strong roots. And ageing is what has developed those strong root fibres.
PHASED RETIREMENT
Adopting an attitude that embraces a phased retirement approach is, I believe, a good strategy for facing future unpredictable challenges [4]. I’m alluding to taking the vehicle for a test-drive — do I enjoy the fast ‘Ferrari’, the SUV 4×4, or the vintage VW?
RETIREMENT INCOME PLANS
Given the cliché that the only things guaranteed in life are taxes and death, it follows that our income plans and lifestyle need to be adjustment-based. We cannot predict the future — our health [5], market crashes [6], cost-of-living pressures [7] — all we can do is adapt to the curveballs thrown our way.
Every retiree, regardless of wealth, makes financial trade-offs [8] — downsizing, reducing travel, or shifting priorities. These adjustments are not signs of failure but part of actively managing retirement in a changing world.
(Go ahead — pat yourself on the back; you’ve more than earned that 2% active-management fee. 😉)
FROM SAVING TO SPENDING — ADJUSTING OUR MINDSET
One adjustment that I am personally struggling with is moving from a frugal mentality to one of ‘let’s spend’ — not so easy! Many of us struggle with this shift from a lifetime of saving to a mindset of “I can spend on myself now.” Decades of frugality become part of our identity, and the fear of outliving our money affects households across every wealth level [9]. It’s simply not a switch we can flip — it requires conscious, gradual rewiring.
THE PSYCHOLOGY OF FRUGALITY
Behavioural research shows that deeply ingrained frugal habits don’t disappear in retirement; they need deliberate modification [10]. One method suggested by retirement psychologists is “practice spending” in the final working years — taking small vacations or easing into discretionary spending to break the automatic frugality reflex.
Just recently, when reviewing my saving ‘habit’, I discovered that I had been contributing far beyond the yearly permitted Retirement Annuity tax deduction. This has certainly been great saving, but by adjusting my contributions down to the allowable percentage, it has now freed up some ‘I can spend on myself’ money. It has released in me a sense of freedom that is rather refreshing.
THE COUNTER-INTUITIVE BENEFIT OF SPENDING MORE
There is another interesting benefit that seems counter-intuitive: these retirees-to-be actually tend to defer their retirement for a year or longer [11]. This happens because they are enjoying work, while at the same time spending more on themselves.
What is great about this is that a few more years of work earnings meaningfully improves the longevity of their savings portfolio [12].
In fact, research has shown that deferring one’s retirement by just six months is equivalent to saving 1% per annum for 30 years [13]. Yes, as much as 30 years — and ironically, you are spending more while doing it. Counter-intuitive it certainly is.
FROM ASSET DIVERSIFICATION TO RISK MITIGATION
During the years of our ‘saving’ culture, the overriding investment principle is one of diversification to ensure asset growth. However, when we enter our retirement phase, we need to switch — or should be switching — to risk mitigation and capital preservation [14].
SAVING STREAMS AND SPENDING STREAMS
There is an interesting concept of ‘saving streams’ that is useful when, now retired, we consider our investments [15]. The various asset types acquire new significance.
When we enter retirement, assuming we are no longer earning work income, we need money to cover the different expense categories: living, travel, and emergency expenses. This is where the different asset types serve different purposes, because the idea is to tie each asset to a time period.
Retirement annuities satisfy living-expense needs; tax-free accounts are for the ‘now-stream’ [16], bonds for the soon- or medium-term stream [17], and equities for long-term growth capital needs [18].
PURPOSE AND PASSION IN RETIREMENT
Personally, I love the line “never stop exploring” — keep learning, keep stretching yourself, and keep finding new passions.
In my opinion, those of us who continue to find purpose — especially when it’s infused with passion — are the fortunate few. And whether we continue to work, generate an income, or make a U-turn altogether, there is neither a right nor a wrong here.
Closing Summary
What I’m realising is that retirement is just another slice of life: unpredictable, occasionally messy, and full of small adjustments. But if we expect the unexpected, stay flexible, and keep exploring what gives us purpose, we’ll be okay. Maybe even better than okay.
References
[1] Society of Actuaries — Longevity Risk Report
https://www.soa.org/resources/research-reports/2017/longevity-risk/
[2] Morningstar — Sequence of Return Risk
https://www.morningstar.com/articles/1250722/what-is-sequence-of-returns-risk
[3] Stanford Center on Longevity — New Map of Life
https://longevity.stanford.edu/new-map-of-life/
[4] Harvard Business Review — The Case for Phased Retirement
https://hbr.org/2019/11/the-case-for-phased-retirement
[5] WHO — Global Ageing & Health Report
https://www.who.int/publications/i/item/9789241565042
[6] Old Mutual Retirement Monitor
https://www.oldmutual.co.za/personal/solutions/retirement/retirement-monitor/
[7] Discovery Healthy Future & Longevity Insights
https://www.discovery.co.za/corporate/healthy-future
https://www.discovery.co.za/corporate/discovery-life-claims
[8] Allan Gray SA — Retirement Insights
https://www.allangray.co.za/insights/
[9] Sanlam Benchmark Survey (2024)
https://www.sanlam.co.za/corporate/benchmark/Pages/default.aspx
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