LAST week I had the opportunity to meet with a new retiree and her young relative. The retiree’s disposition and greeting alerted me to underlying emotional pain.

She informed me that she was not doing well. When asked if she could share what was bothering her, the reason was the loss of her job. It was obvious she was struggling to hold back the tears. She wished she could work longer but was forced to retire early. Her pension lump sum was a few million dollars and her monthly pension is not enough to replace the income she once had. This retiree was mourning the “death” of her pay cheque.

Being unprepared for retirement can result in some retirees having unrealistic expectations of investment performance. The challenge for this retiree was how to invest her lump sum to provide immediate earnings, sufficient to replace the income she lost from the monthly pay cheques. I asked her whether she had considered new employment. However, she decided to take a break for a few months before entering the job market again. A cooling-off period is necessary to keep emotions in check and refocus as this is a new phase of life and decisions must be carefully made. Seeking financial advice from professionals is key during this period of uncertainty. As we discussed her investment options, the retiree expressed much regret regarding not starting her investment journey much earlier during her career. There were opportunities, but she had procrastinated and lost much time.

Several times during our meeting she turned to her young relative to advise her not to make the same mistake. She advised her to start investing now as she is young and time is on her side. The young relative nodded throughout the discussions. She understood the dilemma the retiree faces. It was a teachable moment for her. The right environment and tone for financial discussion are also important. This retiree left the meeting more confident than she came. She knew exactly what needed to be done and made the necessary decisions for her future.

More and more retirees are re-entering the job market either voluntarily or because that’s the only option to provide current income to supplement their pension shortfall or to make ends meet. Recently, I was contacted by a retired teacher who declared that she is now a financial advisor in the life insurance field. It’s a new career path that gives her a new sense of purpose while securing additional income to cover expenses, increase savings, and extend the working years.

A recent Retirement Savings & Spending Study by American-bases financial group T Rowe Price revealed that 48 per cent of respondents who are working in retirement do so for “financial reasons” whereas 45 per cent opted to work in retirement “for social and emotional benefits”.

Retirement is a new phase of life that carries its fair share of uncertainties. But retirement planning requires that we plan for the uncertainties. A financial plan is not the same as an investment plan. A financial plan comprises the investment plan, insurance needs, estate planning, health-care costs, and retirement goals. The ultimate financial goal for retirees should be financial independence. This financial freedom allows retirees to face each day without worrying about outliving their money. They can do what they had longed to do, with the knowledge that they no longer rely on a pay cheque to pay their bills. Financial independence frees them from the constraints of a pay cheque. They understand that their money should outlive them. Having made the sacrifice early, they can enjoy the fruits of their labour and build generational wealth.

Research done by financial services company Northern Mutual showed that not just working-class people are concerned about having enough money for retirement, but millionaires, too, are concerned about outliving their money during retirement. Regardless of our status in life, we have common goals and shared concerns. Financial education is necessary for the future generation of retirees. From the very first job, it’s important to plan how to one day replace the pay cheque with steams of passive income that never stops. Starting a pension plan early and investing for the long term in assets that will increase in value with time — such as stocks and real estate — can create the financial freedom or independence that many seek. Retired professional boxer George Foreman once said, “The question isn’t at what age I want to retire, it’s at what income?”

— Grace G McLean is a financial advisor and retirement specialist at BPM Financial Limited. Contact her at: gmclean@bpmfinancial or visit the website: www.bpmfinancial.com. She is also a podcaster for Living Above Self. E-mail her at livingaboveself@gmail.com