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The key to a successful transition to retirement lies in several tactics, and preparation – both financial and non-financial – is among the most important, according to one expert.
“The highest correlation to that success is the amount of time you spend preparing for retirement – not just the financial elements, which is obvious, and everyone does it, but not so obvious is the -financial side,” says Fritz Gilbert. , author of “The Keys to a Successful Retirement” and guest on a recent episode of Yahoo Finance’s Decoding Retirement.
According to Gilbert, who also publishes the blog Retirement Manifesto, the more time you spend planning both sides of your retirement, the more likely it is that “you’ll find those things in retirement that will give you a sense of fulfillment.” give what you hope for. retire.”
Many future retirees only start thinking about their post-retirement plans after they leave the workforce. However, Gilbert took a different approach and started his planning years in advance – a step he believes is key to his success.
“It definitely helps,” he said. “It has been shown that the more you do in advance of this planning, the smoother the transition will be.”
To ensure retirees have enough money to maintain their desired lifestyle, Gilbert recommended tracking expenses before even retiring.
“You can’t retire without a good basis for your expenses,” he said. ‘It is ultimately a mathematical problem. And the more variables you can eliminate, the better your plan will be.”
Read more: Retirement planning: a step-by-step guide
According to Boston College’s National Retirement Risk Index, 39% of working-age households will not be able to maintain their standard of living in retirement.
In Gilbert’s case, he and his wife tracked every expense for 11 months to establish a baseline and then adjust for retirement by accounting for downsizing, travel and other changes. He also used tools such as the 4% rule (spend 4% of your portfolio annually) as a guideline.
“See how it compares to that estimated spending figure,” he said, noting that if it’s close, all should be good. But if it’s not close, you should consider working longer or cutting costs.
Gilbert also recommended his “90/10 rule.” Before retiring, the self-described spreadsheet nerd said he spent 90% of his time thinking about money and only 10% of his time on the non-financial side of retirement.
“I was a real money nerd,” he said. “I was really focused on the numbers.”
However, once he determined his finances were secure and he retired, the time he spent on money completely changed.
“As that transition happens, you find yourself thinking less about the money because you’ve kind of worked out the kinks and you know what you have to spend,” he said. “And you start thinking: What am I going to do with my life? What is going to give me that fulfillment and excitement every day? And it’s not the money. Money is a means to an end. But when you retire, you look for the end and not just the means.”
And that shift came as a surprise to Gilbert. “It’s a mental shift that I didn’t expect,” he said. “It was one of my bigger surprises. It’s a pretty common reality that you worry a lot less about (money) once you’ve settled down.
Gilbert explained how work often provides people with the “big five”: identity, structure, purpose, a sense of fulfillment and relationships.
Retirees must find a way to replace it. How could they do that? First and foremost, it is essential to recognize the importance of replacing the big five, as they disappear once a retiree leaves work.
Many struggle early in retirement to find structure, purpose or relationships, Gilbert said. “Then you start to recognize that [you’ve] lost these things. Suddenly you no longer have structure in your life.”
In his case, Gilbert began replacing the “big five” by starting his blog three years before he retired. “I was looking for things that could develop into things that would give me satisfaction in retirement,” he said. “So I pursued it… and what does that get me now?”
In short, it has given him a sense of identity, purpose and structure.
That’s why he encourages both potential and current retirees to replace the ‘big five’ by actively researching their curiosities.
“Pursuing your curiosity isn’t a skill we’ve been doing for a long time,” Gilbert said. “So it’s rebuilding that muscle and learning to explore and just having fun with it and realizing that you’re going to try a lot of things that aren’t going to work… it’s a serendipitous process. It’s not a spreadsheet. But if you get better with it in time.”
Retirement is not just an individual decision, it also affects the entire household.
Gilbert emphasized the importance of discussing expectations before retirement. In his own experience, he and his wife conducted a “test retirement,” spending ten days together talking about their goals, the balance between “me time” and “us time,” and their travel preferences.
It also helped to conduct regular post-retirement reviews to meet changing needs and expectations, he said.
Linda Ryall and Todd Nielsen look at each other’s phones at a charging station at the Issaquah Senior Center in Issaquah, Washington, Friday, Nov. 22, 2024. (AP Photo/Manuel Valdes) ·ASSOCIATED PRESS
Despite all his planning and preparation, retirement brought some unexpected surprises and challenges for Gilbert.
The transition from a savings mentality to a spending mentality was more difficult than expected.
“It’s hard to make the transition from building your nest egg to using it, knowing it has to last a lifetime,” he said. And that’s especially the case for retirees who worry about running out of money. “It is a common tendency to remain conservative [and] underspending.”
In 2024, 67% of retired respondents in a Goldman Sachs survey reported having too many monthly expenses, while 55% reported credit card debt.
Gilbert suggested using the bucket approach when creating a retirement income plan as a way to address the fear of running out of money. The bucket approach divides your assets into separate “buckets,” each dedicated to a specific time horizon or purpose.
Typically, it includes a short-term bucket, which holds cash or low-risk investments to cover immediate expenses (e.g., 1-3 years); a medium-term bucket, which includes moderately conservative investments for spending over the next three to ten years; and a long-term bucket, which includes growth-oriented investments, such as stocks, intended for use more than ten years after retirement.
In terms of mentality, Gilbert’s retirement went exactly as he imagined: he followed his curiosity and explored new interests as he had planned.
Where that mentality has taken him, however, was completely unexpected. For example, he never thought he would have a woodworking shop or a dedicated writing studio, but those came about through unexpected opportunities such as charity work.
“The biggest surprises – and the greatest excitement – have come from following where my curiosity has led me,” Gilbert said.
He also discovered that he could find fulfillment in retirement by focusing on others. Retirement, he said, is an excellent time to give back, whether through mentoring, volunteering or charity work.
“Start looking at people who may not have made it yet,” he said. “And find a way to use your time to benefit those in need.”
Every Tuesday, retirement expert and financial educator Robert Powell gives you the tools to plan your future Decoding retirement. You can find more episodes on our videohub or check your favorite streaming service.