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The key to a successful transition to retirement consists of several tactics, and preparation – both financial and non-financial – is one of the most important, according to one expert.
“The single biggest correlate of that success is how much time you spend preparing before retirement — not just the financial stuff, which is obvious, and everyone does it, but the non-financial side is not so obvious,” said Fritz Gilbert, author of “The Keys to a Successful Retirement” and a guest on a recent episode of Yahoo Finance’s Decoding Retirement.
According to Gilbert, who also publishes Retirement Manifesto blogthe more time you spend planning for both sides of retirement, the better your chances of “finding in retirement those things that will bring you the sense of fulfillment you hope for in retirement.”
Many potential retirees don’t start thinking about their post-retirement plans until after they leave the workforce. Gilbert, however, took a different approach, starting with planning years in advance—a move he credits as key to his success.
“It certainly helps,” he said. “It’s been proven that the more you do in advance in terms of this planning, the easier the transition will be.”
In order for pensioners to provide themselves with enough money to maintain the lifestyle they want, Gilbert recommends tracking spending even before retirement.
“You can’t retire without a good spending base,” he said. “Ultimately, it’s a math problem. And the more variables you can eliminate, the better your plan will be.”
According to Boston College’s National Retirement Risk Index39% 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 each expense for 11 months to establish a baseline, then adjusted it for retirement to account for downsizing, travel and other changes. He also used tools like the 4% rule (spending 4% of your portfolio annually) as a guide.
“See how that compares to the estimated consumption number,” he said, noting that if it’s close, you should be fine. But if it’s not close, you’ll have to consider working longer or cutting costs.
Gilbert also recommended his “90/10 rule.” Before retirement, the self-described spreadsheet geek said he spent 90% of his time thinking about money and only 10% of his time focused on the non-financial side of retirement.
“I was a real money geek,” he said. “I was really focused on the numbers.”
However, once he found his finances secure and retired, the time he spent focusing on money completely turned around.
“As that transition happens, you think less about money because you’ve kind of come through the gaps and you know what you have to spend,” he said. “And you start thinking about what am I going to do with my life? What will bring me that fulfillment and that excitement every day? And it’s not about money. Money is a means to an end. But when you retire, you start looking for the goal, not just the means.”
And that change was a surprise for Gilbert. “It’s a mental shift I didn’t expect,” he said. “It was one of my biggest surprises. It’s a pretty common reality that you worry a lot less about (money) once you’re settled.”
Gilbert explained that work often gives people the “big five”: identity, structure, purpose, a sense of accomplishment and relationships.
Pensioners must find a way to replace them. How could they do that? First and foremost, it’s important to recognize the importance of replacing the Big Five since they disappear when a retiree leaves work.
Many struggle early in retirement to find structure, purpose or relationships, Gilbert said. “That’s when you start to recognize it [you’ve] 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 retiring. “I was looking for things that could potentially develop into things that would give me fulfillment in retirement,” he said. “So I went ahead with it… and what does it get me now?”
In short, it gave it a sense of identity, purpose and structure.
That’s why he encourages future and current retirees to replace the “big five” with active research of their interests.
“Pursuing your curiosity is not a skill we’ve practiced for a long time,” Gilbert said. “So it’s rebuilding that muscle and learning to explore and just have fun with it and recognize that you’re going to try a lot of things that won’t work … it’s a random process. It’s not a spreadsheet. But if you get better over time.”
Retirement is not just an individual decision – it also affects the whole household.
Gilbert emphasized the importance of discussing expectations before retirement. In his own experience, he and his wife conducted a “retirement trial,” spending 10 days together to discuss their goals, the balance between “me time” and “we time,” and their travel preferences.
Doing regular post-retirement checkups to address changing needs and expectations also helped, he said.
Linda Ryall and Todd Nielsen look at each other’s 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 expected.
“It’s hard to go from building your nest to using it, knowing it has to last a lifetime,” he said. And this especially applies to retirees who are worried about running out of money. “It is a very common tendency to continue to be conservative [and] spend too little.”
In 2024, 67% of retirees in a Goldman Sachs survey indicated they had too many monthly expenses, while 55% reported credit card debt.
Gilbert suggested using the bucket approach to creating a retirement income plan as one way to address the fear of not having enough money. The bucket approach involves dividing your assets into separate “buckets”, each designated for a specific time horizon or purpose.
Usually includes a short-term group containing cash or low-risk investments to cover immediate expenses (eg 1-3 years); the medium-term group, which contains moderately conservative investments for expenses in the next 3-10 years; and the long-term group, which includes growth-oriented investments, such as stocks, intended for use 10 years or more after retirement.
In terms of mindset, Gilbert’s retirement turned out just as he envisioned: he followed his curiosity and explored new interests as he had planned.
However, it is completely unexpected where that way of thinking took him. For example, he never thought he’d have a woodworking shop or a dedicated writing studio, but it came through unexpected opportunities, like charity work.
“The biggest surprises — and the biggest excitement — came from following where my curiosity took me,” Gilbert said.
He also discovered that in retirement he might find fulfillment by focusing on others. Retirement, he said, is a great 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.”
