Despite marketing images of carefree retirees on beaches, most people’s fear and uncertainty increases as they approach retirement. A far more typical attitude is “my spouse is retiring – will we run out of money?”

Both phrases highlight psychological and financial concerns about one of the biggest transitions you will make in your life. Most retirement advice focuses on money in the bank. It’s drilled into us – work hard, earn money, build your super. But at retirement, for the first time in your adult life, you won’t receive a paycheck this month (or ever again). You undergo a difficult psychological leap from saver to spender. Recognise that increased uncertainty in early retirement is a certainty.

Your brain will be flooded with “what if” questions. What if we live so long our funds run out? What if we spend too much? What if one of us gets sick or dies? What if markets crash?

Even if you have few concerns, your spouse may have many. A couple can have vastly different worries and expectations, so make sure you address these in your retirement planning.

After a long, successful career, announcing “Honey, I’m home forever” places stress on any relationship. While you are both working, you have independence and other relationships. When at home, you need to adjust and relearn what you enjoy doing together. It’s not wise for A-type personalities at work to try to take over the management of the home to fill the void.

Because of COVID-19 lockdowns, we already know how to spend extended periods alone with our loved ones. If your relationship survived the pandemic, retirement should be manageable. Despite retirement advertisements, retirement won’t feel like a permanent vacation. The novelty of travelling soon wears off. Instead, you settle into a new equilibrium of daily chores, hobbies, family, friendships and passion projects. That said, nearly all our clients plan an exciting trip to celebrate retirement and travel extensively in the first five to 10 years of retirement. Plan to keep yourself busy and keep yourself challenged.

Work and professional network are crucial parts of identity. Stepping away from your team, your daily purpose and routine can be lonely. When someone asks “what do you do?“, you will need to reinvent a new purpose and routine you find interesting. If you don’t, it can trigger stress, anxiety and depression.

One UK study found retirement increases the probability of clinical depression by about 40 per cent. So invest as much in your mental health as you do in your physical health. While the psychological challenges of retirement are significant, the financial transition also requires careful navigation.

The first five years are crucial for a smooth financial retirement. Not only is this the first time you are drawing on your savings, but it’s also when your retirement expenses are probably at their peak.

You should get rid of your mortgage before or at retirement. You don’t want that additional burden and stress. This frees up cash flow and gives you a psychological boost. Downsizing is also a popular option.

For many, expenses in early retirement are often higher than expected and unpredictable. You may have a bucket list of experiences or outlays to set up your hobbies, so plan for this. You should probably budget 75 per cent to 80 per cent of your annual salary.

If there’s a time to budget, it’s now. A deep dive on your expenses in retirement will empower you with information on necessities and discretionary expenses. How much you spend is crucial information in determining if your money will last your lifetime or not.

With reduced monthly earnings, you will learn to adjust to this new normal and manage your cash flow accordingly. A common strategy is to set up a monthly automatic payment from your SMSF to replicate  the income you received from employment. You need to be flexible. Markets will fluctuate, and one-off expenses will reoccur.

When markets are down, you may travel less and wait for the recovery. When you are well into retirement, your expenses typically won’t drop materially, but they will change – instead of travel, you will spend more on healthcare and helping family.

Before you finish working, retirement seems like the finishing line. Once you pass it, you realise it’s just the start line for what is hopefully an exciting chapter of your life. Prepare yourself psychologically and budget for all the amazing things you plan to do. Embrace retirement, plan wisely, and savour every moment.