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What’s your retirement game plan?

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Life is all about transitions, like graduation, starting a family, changing jobs, moving to a new home, raising a family, and eventually, retirement. While many of us successfully negotiate these transitions, retirement often poses the greatest challenge.

When an elite athlete retires from competition, it’s often the result of a career-ending injury or being cut from the team.1 Many have had long and distinguished careers. Hall-of-Fame baseball player Cal Ripken, Jr. played in a record 2,632 consecutive games and was a 19-time All-Star.2 John Salley had a 15-year NBA career, winning four championships with three different teams.3 But the timing of Salley’s retirement from basketball was not his decision.4

Ripken, Jr. and Salley enjoyed professional sports careers that were longer than most. The average professional baseball career is only 6 years long5 and NBA careers average only 4.8 years.6 Few retire on their own terms while still able to compete at the highest levels. Citing future health concerns, 24-year-old San Francisco 49ers linebacker Chris Borland quit after just one very successful season of professional football.7

While Ripkin, Jr. and Salley went on to build very successful business careers after they stopped playing, many others, like Borland, are not prepared for life after retirement from the game.8 Most have limited experience outside of professional sport to build on for the next chapter in their lives.

During an athletic career, almost all attention is focused on physical activity and development, nutrition, and the mental aspects of their sport, leaving little time to develop the social skills, self-esteem, resiliency and coping strategies needed to adapt to future lifestyle changes. A lack of transition planning and support services have been identified as significant contributors to the difficulty that many athletes experience transitioning to their next career after retirement.9

The issues that many elite or professional athletes face at the end of their sporting careers are actually no different from those the rest of us experience at our retirement – they just face these challenges much earlier. They often feel an initial sense of loss, followed by a period of re-orientation, then growth, and later, adaptation to their changed situation . Kareem Abdul-Jabbar, the all-time record scorer10 in the National Basketball Association, summed it up best – when he missed the first training camp after his retirement he thought, “what am I going to do now?” 11

The fact is that most of us (who are not professional athletes) have longer working careers and therefore have the luxury of more time to prepare for retirement – assuming that we start early, give it some thought, and save for it.

Attitudes or mindsets most likely found in satisfied retirees
Source: BMO Wealth Institute survey by ValidateIt Technologies Inc., January 2016

Why do we retire?

Life is about transitions, and like professional athletes, we go through many life transitions. These may include graduation, starting a family, changing jobs, moving to a new home, raising a family, and eventually, retirement. Retirement is really just another chapter in the story of our lives. We have successfully dealt with many transitions already, and retirement can simply be viewed as the opening of the next chapter.

The BMO Wealth Institute commissioned a study to look at the concerns, opinions and attitudes that Americans have about retirement.12 When asked how much thought they put into the non-financial aspects of their retirement, 62% said they gave it at least some thought . They also felt that having a positive attitude or mindset towards being busy, active and independent are some of the most important factors found in satisfied retirees.

There are many reasons why people move into retirement, but most respondents in this survey said they retired ¬– or will be retiring – on their own terms. The study found that the most common reasons for retirement given by respondents overall were their age or being at the right stage of their life (39%), and being financially able to retire (20%). However, there are some notable differences in the reasons for retiring between the already retired and those still planning to retire. Unsurprisingly, health and family reasons ranked highest on the list for retirees (37%), above being financially able to retire (17%), and well above receiving a buyout from an employer (6%). In contrast, only 15% of those still planning to retire thought their health or family issues would be a factor.

Main reasons for retirement based on retirement status
Source: BMO Wealth Institute survey by ValidateIt Technologies Inc., January 2016

These results amongst the retired are consistent with larger studies that indicate that health concerns and involuntary retirement as a result of layoffs are the two main factors associated with an earlier retirement.13

When do we retire?

The average age at which Americans retire has slowly increased over the last two decades. In 2013, a report from the Center for Retirement Research at Boston College indicated that retirement age averaged 63.9 years for men, and 61.9 years for women. This compares to only 62.4 years for men and 58.5 years for women back in 1993.14 The majority of respondents of the BMO survey who were already retired were between the ages of 55 and 64.

When asked how they felt about the life stage of retirement, the majority of respondents exhibited excitement and optimism (54%), preparedness (45%), and confidence with feelings of contentment and security (45%).

Feelings about the life stage of retirement

How to retire successfully

Retirement is not an everlasting vacation, and is much more than just not going to work the following morning. Survey respondents were asked which personal attributes help with the transition into a successful and fulfilling retirement. Most picked being engaged or interested in daily activities as the most influential attribute (70%), followed by leading a purposeful and meaningful life (65%) and being “capable in activities important to me” (61%), indicating a belief by many in the importance of having a positive outlook toward the future.

Attributes that help retirees transition into retirement
Source: BMO Wealth Institute survey by ValidateIt Technologies Inc., January 2016

Building on the need for a positive attitude, Dr. Amy S. D’Aprix, MSW, PhD, CSA, an internationally renowned expert on lifestyle issues related to aging, tells us that the three keys to a successful retirement are purpose, people, and perspective.

Purpose: Having a sense of purpose is a key factor, and is best explained by that need or drive for something to get you out of bed in the morning. That purpose gives your life a sense of meaning. Your sense of purpose can be enhanced by assessing your life and focusing on what matters to you now, and what you excel in or thrive in doing.

People: It’s human nature to be social, and social support has many components; the most important of which are emotional or relating to companionship, and tangible (such as practical assistance with day-to-day needs). Many studies have found clear evidence that having positive and nourishing social interactions is linked to better health. Studies have also shown that strong social relationships have similar health and longevity benefits to well-known interventions like cutting out smoking, becoming physically active and eliminating obesity.15

Despite the research showing the importance of having strong social connections, the BMO survey indicates that few Americans acknowledge this critical factor. When respondents were asked to select the most important factor in adjusting to life in retirement, most picked having finances in order (82%) and being in good health (73%), followed by maintaining a sense of purpose or meaning (53%), and having a positive attitude or mindset (47%). The following table also shows that survey respondents listed having enough social connections (20%) below the ability to adapt to change (31%).

Factors that help with the adjustment to life in retirement
Source: BMO Wealth Institute survey by ValidateIt Technologies Inc., January 2016

According to Dr. D’Aprix, social support is key to aging well, both from a physical and mental standpoint. She also comments that:

It is so important to build social connections and make friendships as you grow and live your life. You have to deepen current relationships, and invest time and effort to make new ones.

Perspective is about having a good attitude towards your future. Having a belief that you can succeed, often referred to as self-efficacy, is very important. A positive perspective is an important factor in building resiliency in retirement.

Resilience is the ability to recover quickly from a difficult situation, and having the internal strength and toughness to rise above any challenges. Having confidence in oneself is an important contributor to resilience. In fact, confidence, when combined with financial learning, helps a person to make more informed and beneficial financial decisions16 that can contribute to a successful retirement regardless of the challenges faced.

The BMO survey revealed that the biggest challenges about living in retirement were running out of money (69%) and serious health problems (66%), followed by not having a sense of purpose (40%). When it comes to what to expect in retirement, the question What is next? is asked not only by elite athletes, but also by the majority of people entering this chapter in their lives. For many, Dr. D’Aprix believes, the best way to find the answer to this frequently asked question is to actively plan for this transition.

 

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* The foregoing summary is not based upon the factual situation of any specific taxpayer, is not intended to be tax advice to any taxpayer and is not intended to be relied upon.
BMO Global Asset Management does not offer tax advice. Contact your tax advisor.
This information cannot be used by any taxpayer for the purpose of avoiding tax penalties that may be imposed on the taxpayer. This information is being used to support the promotion or marketing of the planning strategies discussed herein. BMO Financial Group and its affiliates do not provide legal or tax advice to clients. You should review your particular circumstances with your independent legal and tax advisors.
Estate planning requires legal assistance which BMO Financial Group and its affiliates do not provide. You should discuss your particular estate-planning situation with a qualified attorney.
BMO Wealth Institute, a unit of BMO Financial Group, provides this commentary to clients for informational purposes only. The comments included in this document are general in nature and should not be construed as legal, tax or financial advice to any party. Particular investments or financial plans should be evaluated relative to each individual, and professional advice should be obtained with respect to any circumstance.

1. A review on transitional implications for retiring elite athletes: What happens when the spotlight dims? Smith, J.L. and McManus, A. The Open Sports Sciences Journal, 2008. http://benthamopen.com/contents/pdf/TOSSJ/TOSSJ-1-45.pdf
2. Cal Ripken, Jr. National Baseball Hall of Fame. (accessed January 27, 2016) http://baseballhall.org/hof/ripken-cal
3. John Salley. http://johnsalley.com/about-me/ (accessed January 27, 2016)
4. How star athletes deal with retirement. Laura, R. Forbes, May 22, 2012. www.forbes.com/sites/robertlaura/2012/05/22/how-star-athletes-deal-withretirement/2/#358040de2e36
5. Just how long does the average baseball career last? Roberts, S. The New York Times, July 15, 2007. www.nytimes.com/2007/07/15/sports/baseball/15careers.html?_r=0
6. CHART: The average NBA player will make a lot more in his career than the other major sports. Gaines, C. Business Insider, October 10, 2013. www.businessinsider.com/chart-the-average-nba-player-will-make-lot-more-inhis-career-than-the-other-major-sports-2013-10
7. NFL players giving up millions and retiring out of nowhere before age 30 is becoming a trend. Manfred, T. Business Insider, March 17, 2015. www.businessinsider.com/nfl-players-retiring-early-2015-3
8. Why former 49er Chris Borland is the most dangerous man in football. Fainaru, S. and Fainaru-Wad, M. ESPN, August 21, 2015. http://espn.go.com/nfl/story/_/id/13463272/how-former-san-francisco-49erschris-borland-retirement-change-nfl-forever
9. A review on transitional implications for retiring elite athletes: What happens when the spotlight dims? Smith, J.L. and McManus, A. The Open Sports Sciences Journal, 2008. http://benthamopen.com/contents/pdf/TOSSJ/TOSSJ-1-45.pdf
10. NBA history – points leaders. ESPN. http://espn.go.com/nba/history/leaders (accessed January 26, 2016)
11. The end game: How sports stars battle through retirement. Martin Wrenn, J. CNN, January 7, 2013. www.cnn.com/2013/01/05/living/aging-athletes-retirement/
12. BMO Wealth Institute – survey conducted by ValidateIt Technologies Inc. for the BMO Wealth Institute between January 13–16, 2016, with an online sample size of 1030 Americans consisting of 561 respondents aged 55 and older planning to retire in the next 10 years, and 469 respondents aged 55 and older already retired. The overall probability results for a sample of this size would be accurate to within +/- 3.05% 19 times out of 20.
13. What causes workers to retire before they plan? Munnell, A.H., Sanzenbacher, G.T., and Rutledge, M.S. Center for Retirement Research at Boston College, September 2015. http://crr.bc.edu/wp-content/uploads/2015/09/wp_2015-22.pdf
14. The average retirement age – an update. Munnell, A.H. Center for Retirement Research at Boston College, March 2015. http://crr.bc.edu/briefs/the-average-retirement-age-an-update/
15. Social relationships and mortality risk: A meta-analytic review. Holt-Lunstad, J., Smith, T.B. and Layton, J.B. PLOS Medicine, July 27, 2010. http://journals.plos.org/plosmedicine/article?id=10.1371/journal.pmed.1000316
16. Meeting expectations: Measuring the impacts of workplace essential skills training. Palameta, B., Gyarmati, D., Leckie, N., Kankesan, T. and Dowie, M. The Centre for Literacy, March 2013. www.centreforliteracy.qc.ca/sites/default/files/Mos_Rpt.pdf

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