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The key to a successful transition into retirement lies in several tactics, and preparation (both financial and non-financial) is one of the most important, according to one expert.
“The highest correlation to that success is how much time you spend preparing before retirement, not just the financial elements, which is obvious, and everyone does it, but not so obvious is the non-financial aspect,” he said. 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 Retirement Manifesto blog, the more time you spend planning for both sides of retirement, the greater the chance that “in retirement you will find those things that will give you the sense of fulfillment that you hope for.” have in retirement.”
Many future retirees don’t start thinking about their post-retirement plans until they leave the workforce. Gilbert, however, took a different approach and began his planning years in advance, a move he considers critical to his success.
“It certainly helps,” he said. “It has been shown that the more that is done ahead of time in terms of this planning, the smoother the transition will be.”
For retirees to ensure they have enough money to maintain their desired lifestyle, Gilbert recommended tracking expenses even before you retire.
“You can’t retire without having a good spending base,” he said. “Ultimately, it is 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 adjusted retirement taking into account staff reductions, travel and other changes. He also used tools like the 4% rule (spend 4% of your portfolio annually) as a guide.
“See how it compares to that estimated spending figure,” he said, noting that if it’s close, you should be fine. But if you’re not around, you’ll need to consider working longer or cutting back on expenses.
Gilbert also recommended his “90/10 rule.” Before he retired, the self-described spreadsheet nerd said he spent 90% of his time thinking about money and only 10% of his time focused on the non-financial aspect 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 retired, the time he spent focusing on money completely changed.
“As that transition happens, you think less about money because you’ve overcome the problems and you know what you have to spend,” he said. “And you start thinking, what am I going to do with my life? What will give me that satisfaction and excitement every day? And it’s not the money. Money is a means to an end. But as you retire, you start looking for the end and not just the means.”
And that change was a surprise to Gilbert. “It’s a mental change that I didn’t expect,” he said. “It was one of my biggest surprises. It is a fairly common reality that one worries much less about (money) after settling in.”
Gilbert explained how work often provides people with the “big five”: identity, structure, purpose, sense of accomplishment, and relationships.
Retirees have to find a way to replace them. How could they do that? First, it is vital 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. “That’s when you start to recognize that [you’ve] I lost these things. Suddenly you have no 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 potentially become things that would give me satisfaction in retirement,” he said. “So I kept going… and what does that do for me now?”
In short, it has given you a sense of identity, purpose and structure.
That’s why he encourages current and potential retirees to replace the “big five” by actively exploring their curiosities.
“Pursuing curiosity is not a skill we have exercised for a long time,” Gilbert said. “So it’s about rebuilding that muscle and learning to explore and just having fun with it and recognizing that you’re going to try a lot of things that aren’t going to work… it’s a serendipitous process. It is not a spreadsheet. But it does improve over 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 took a “trial retirement,” spending 10 days together to talk about their goals, the balance between “me time” and “us time,” and their travel preferences.
It also helped conduct regular check-ins after retirement to address changing needs and expectations, he said.
Linda Ryall and Todd Nielsen look at their phones at a charging station located at the Issaquah Senior Center in Issaquah, Wash., Friday, Nov. 22, 2024. (AP Photo/Manuel Valdes) ·ASSOCIATED PRESS
Despite all his planning and preparation, retirement brought several unexpected surprises and challenges for Gilbert.
The transition from a saving mindset to a spending mindset was more difficult than anticipated.
“It’s hard to go from accumulating savings to using them, knowing that they have to last a lifetime,” he said. And that’s especially the case for retirees who are worried about running out of money. “It is a very common tendency to remain conservative [and] spend less than necessary.”
In 2024, 67% of retirees surveyed by Goldman Sachs indicated they had too many monthly expenses, while 55% reported having credit card debt.
Gilbert suggested using the bucket approach to create a retirement income plan as a way to address the fear of running out of money. The bucket approach involves dividing your assets into separate “buckets,” each designated for a specific time horizon or purpose.
Typically includes a short-term category, containing cash or low-risk investments to cover immediate expenses (e.g., 1 to 3 years); a medium-term segment, which contains moderately conservative investments for expenses in the next 3 to 10 years; and a long-term category, which includes growth-oriented investments, such as stocks, intended to be used for more than 10 years after retirement.
In terms of mindset, Gilbert’s retirement turned out just as he imagined: he pursued his curiosity and explored new interests just as he had planned.
However, where that mentality has taken him has been completely unexpected. For example, he never thought he would have a dedicated woodworking shop or writing studio, but they came about through unexpected opportunities, such as charity work.
“The biggest surprises, and the biggest excitement, come from following where my curiosity took me,” Gilbert said.
He also discovered that he could find satisfaction in retirement by focusing on others. He said retirement is a great time to give back, whether through mentoring, volunteering or charitable work.
“Start looking for people who maybe haven’t 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 in Decoding retirement. You can find more episodes in our video center or look in your preferred streaming service.
