Four Tips for Transitioning into Retirement Successfully (2022)

Our natural inclination is to view retirement as a happy and stress-free phase of life – and it absolutely can be. However, when you’re transitioning into retirement it can feel disorienting and nerve-wracking. Making the shift from the working and saving phase of your life to the life of a retiree tends to be a rollercoaster of emotions, and this life pivot can be taxing for even those who are the most prepared.

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Why Transitioning into Retirement Can Be Challenging

The novelty of not having to go to work every day can wear off quickly and leave some people feeling a bit empty or bored once they retire. This is especially true for people whose personal identity was strongly tied to their work. If you’re feeling like this, anxiety and over-thinking can begin to flourish – oftentimes about your finances. When you’re no longer receiving a regular paycheck, yet facing fresh financial demands in retirement, it’s common to be tempted to pull your money from your investments and lock everything up in the safety of a savings account. However, you’re not going to need all of your money on the first day you retire, and attempting to eliminate all of the fluctuations in your portfolio can ultimately end up creating new risks that you may not be expecting.

Fortunately, there are things that you can be doing now to help navigate your future transition into retirement with the confidence and security that you deserve. Below are four tips to help you pivot into retirement successfully.

Tip #1: Plan Early and Often

Perhaps the best way to be sure you’re prepared for your transition into retired life is to have a concrete, well-thought-out plan for the transition. You should begin thinking about and establishing this plan five to ten years in advance of when you expect to retire. Planning early allows you to have plenty of time to readjust, catch up, or move your retirement date if your current savings and investment strategy is inadequate to support the retirement that you want. Early planning also affords you the ability to start investing in various types of accounts that will ultimately provide you more flexibility in retirement, such as taxable, tax-free, and tax-deferred accounts.

In addition, planning early provides you the time you need to sit down and really think about what you want your retirement to look like. When and where will you retire? How will you spend your free time? What do want to experience or achieve in retirement? Do you want your home to be paid off by then, or will you be juggling a mortgage or rent? Engaging with these questions seriously takes time, and the answers will provide you the details you need to shape a long-term spending and investment plan for retirement. Having a clear picture of what you want life to look like can also help ease the shock of retired life once you finally hit this milestone.

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These questions are meaningful, and the planning that goes with them is complex. This means your retirement planning must not be a one-time exercise. You should be revisiting your answers to the above questions and your investment and savings strategies at least once per year so that you can address anything that may have changed as you get closer to leaving the workforce.

Tip #2: Stress Test Your Investments

The financial markets can be volatile and are impossible to predict, which is why people tend to lean toward the conservative side with their investments as they approach retirement. If the markets should take a turn for the worse, returning to work could be difficult. This makes many people uneasy about the idea of staying open to greater fluctuation in the value of their portfolio. However, a better way to navigate this dilemma is by stress testing your portfolio.

To do a stress test, you first have to determine the gap between your reliable sources of retirement income, such as pensions or Social Security, versus the amount you plan to spend in retirement. The discrepancy between the two values is where your portfolio comes in. Look at your investments and measure how much of a hit you could take from a bear market and still be provided with the monthly income you’ll need. Additionally, look at how your portfolio would serve you in a conservative low-risk, low-return portfolio – and don’t forget to factor in inflation. While you’re analyzing these factors, you may want to also consider what might happen to your investment plans should you live longer than you’re expecting.

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Taken together, these tests should give you more confidence in the fact that you’re positioned correctly to keep your portfolio growing in the ways that you need it to regardless of market conditions, but also ensure that you’re not taking more risk than necessary. Being informed with this information can help to ease any investment anxiety you may have and encourage you to stick with your long-term investment plan.

Tip #3: Make Sure Your Withdrawals are Tax-Efficient

By the time you find yourself transitioning into retirement, you’ll likely have your money in several different types of accounts, such as IRAs or 401(k)s, Roth IRAs, and taxable accounts. If you have multiple types of accounts and you need to begin taking distributions, be sure to think about which account the money is coming from and how it may impact your income tax rate.

If you’re going to be spending more money, whether to buy a vacation home or fund a child’s wedding, you may want to withdrawal from your Roth IRA and other accounts that provide tax-free withdrawals. If you’re at a time in your life where you don’t have any large expenses or aren’t spending as much, it may be smarter to withdrawal from accounts that are taxed more heavily, as you’re still likely to be in a lower tax bracket.

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Tip #4: Learn to Be Flexible

The only thing we can be sure of in life is that we can’t be certain of what the future holds. Life has a funny way of throwing curveballs when we least expect them. Should something unexpected arise, don’t abandon your financial plans altogether. Rather, assess what might need tweaking and make the necessary adjustments. If the unexpected event is something big, such as getting a divorce, being diagnosed with a serious illness, or a significant drop in the markets, sit down with your financial advisor to talk about the best strategy for moving forward toward your goals.

Transitioning into Retirement is About Being Proactive - Not Reactive

After spending so much of your life working and saving, you have the right to a stress-free and rewarding retirement experience. It may seem tempting to make big moves and it can be easy to fall victim to your emotions and let your anxieties determine what actions you take. However, doing so will usually cause more harm than good. Following the four tips above will help you transition into retirement successfully.

If you would like to speak with a financial advisor to help you build a retirement plan to suit your needs, or you would like a second look at your existing strategy, please contact us today. At TriCapital, we take pride in helping our clients build wealth for life.

Securities offered through Triad Advisors, LLC, member FINRA/SPIC. Advisory services offered through TriCapital Wealth Management, Inc. TriCapital Wealth Management, Inc. is not affiliated with Triad Advisors, LLC.

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Please note that the information in this article is accurate to the best of our knowledge at the time of publishing. We cannot guarantee that this information will always be accurate due to ongoing changes in the tax code and government regulations.

FAQs

What are the four basic steps of retirement planning? ›

Four Basic Steps for a Successful Retirement
  • investment.
  • retirement.
  • Retirement planning.
  • Retirement Readiness.
  • Retirement savings.

What are 5 key tips for retirement savings? ›

Retirement advice from real retirees
  • Monitor your investments in pre-retirement. Money needed 5-10 years into retirement is most vulnerable, so avoid overspending. ...
  • Plan for inflation as a fact of life. ...
  • Talk with your spouse or significant other about retirement spending. ...
  • Focus on physical health.

What are 5 factors when planning for retirement? ›

Retirement planning should include determining time horizons, estimating expenses, calculating required after-tax returns, assessing risk tolerance, and doing estate planning. Start planning for retirement as soon as you can to take advantage of the power of compounding.

What is transition to retirement example? ›

An example of a Transition to Retirement (TTR) Pension is simple. A TTR pension is commenced with some or all of your superannuation balance while you are still working and you are required to draw an income of between 4% and 10% of the account balance, as calculated on 1 July of each year.

What are the five emotional stages of retirement? ›

Here are five stages you can expect to encounter and suggestions for ways you can help to prepare yourself.
  • Realisation. When your retirement date arrives and you're ready to realise your retirement plan, you're likely to feel mixed emotions. ...
  • Honeymoon period. ...
  • Disenchantment. ...
  • Reorientation. ...
  • Stability.

What is the 3 bucket retirement strategy? ›

The retirement bucket strategy divides your retirement income into three buckets: short-term needs, mid-term needs and long-term needs. The goal is to have your income needs always met, regardless of market volatility.

What are 4 reasons to plan for retirement? ›

It might seem like retirement is far away, but the reality is that when it comes to retirement planning, it's never too early to start.
  • Compound interest. ...
  • Access to higher risk, higher reward investments. ...
  • Don't count on Social Security benefits. ...
  • Account for inflation.
15 Aug 2022

What are the 3 goals of retirement? ›

Some common retirement goals include: Set a retirement budget. Plan a milestone event. Prioritize wellness.

What are 4 common ways to saving for the future? ›

4 Simple Ways To Save For The Future
  • Stretch Your Dollars Wisely. Set a realistic budget and look for ways to reduce spending. ...
  • Make Saving A Priority. ...
  • Register For Automatic Transfer. ...
  • Start Thinking About Retirement … Now.

What is the most important thing in retirement? ›

According to an AgeWave study, more than 80% of today's retirees say health is the most important ingredient for a happy retirement, meaning that the majority value good health even over financial security.

What is the key to retirement? ›

He also says they “eat well, sleep soundly, play often, exercise at least three times a week and maintain strong social connections.” In fact, a survey by Age Wave and Merrill Lynch of 3,300 pre-retirees and retirees said “good health” as the No. 1 key to happiness in retirement. 6.

What are the top 10 things people do when they retire? ›

Things to do in retirement – 25 ideas to inspire you
  • #1 Declutter your home and free your mind. ...
  • #2 Explore your local area. ...
  • #3 Become a tour guide. ...
  • #4 Work for wildlife. ...
  • #5 Research your family tree. ...
  • #6 Dress the part. ...
  • #7 Get musical. ...
  • #8 Learn to dance.
3 Nov 2022

What are the six stages of retirement? ›

Let's take a closer look at each of the six phases of retirement.
  • Pre-Retirement: Planning Time. ...
  • The Big Day: Smiles, Handshakes, and Farewells. ...
  • Honeymoon Phase: I'm Free! ...
  • Disenchantment: So This Is It? ...
  • Reorientation: Building a New Identity. ...
  • Routine: Moving On.

What are the top 5 challenges you will face in retirement? ›

  • Outliving your money in retirement. The biggest threat retirees face is outliving their retirement savings, according to Hou's research. ...
  • Higher-than-expected medical costs. ...
  • Stock market volatility. ...
  • Family expenses. ...
  • Social Security policy changes.
8 Jul 2022

What is the 90 10 Rule of retirement? ›

The 90/10 investing strategy for retirement savings involves allocating 90% of one's investment capital in low-cost S&P 500 index funds and the remaining 10% in short-term government bonds.

When should I transition to retirement? ›

Once you reach age 65 or meet a condition of release, your account moves into 'retirement phase'.

What do retired people do all day? ›

Retirees enjoy over seven hours of leisure time per day, according to 2019 data from the American Time Use Survey. They use their newfound free time in a variety of ways, including taking up new hobbies, relaxing at home, watching TV and lingering over daily activities. Many retirees also continue to work or volunteer.

What should you not do in retirement? ›

Plan for healthcare costs in retirement, pay off debt and delay Social Security until age 70 to help maximize your benefits.
  • Quitting Your Job. ...
  • Not Saving Now. ...
  • Not Having a Financial Plan. ...
  • Not Maxing out a Company Match. ...
  • Investing Unwisely. ...
  • Not Rebalancing Your Portfolio. ...
  • Poor Tax Planning. ...
  • Cashing out Savings.

How do you stay mentally sharp after retirement? ›

8 Ways to Remain Mentally Fit in Retirement
  1. Stay Physically Fit. Physical activity, i.e. exercise, helps keep people's brain working as well as the rest of their body. ...
  2. Volunteer. ...
  3. Keep Learning. ...
  4. Get Proper Sleep. ...
  5. Manage Stress. ...
  6. Identify and Treat Health Problems. ...
  7. Eat a Brain Diet. ...
  8. Practice Memory Ticks.
4 Dec 2018

What is the 80/20 rule for retirement? ›

Ideally, most of the money should go to retirement investments, since financial planners commonly recommend putting at least 10 to 15% of your paycheck away for retirement. The remaining 80% goes toward needs and wants, including food, rent and entertainment. But how you choose to spend that money is up to you.

What is the 75 rule for retirement? ›

You are eligible to receive retiree benefits if you meet the “Rule of 75”. This rule states that you must be a minimum of 55 years of age and have a minimum of 10 years of continuous full-time service; if you meet both minimums, then the total of your age and years of service must equal at least 75.

What is the 80 rule for retirement? ›

What is the Rule of 80? This provision creates a so-called Rule of 80, a new definition of Normal Retirement for members of the Hybrid Defined Benefit Component. This allows members to claim a full, unreduced pension benefit if their combined age and years of service equal at least 80, beginning at age 50.

What factors promote a successful retirement? ›

Successful retirement planning requires flexibility and the willingness to look at all aspects of your life.
  • Many people get great satisfaction from work. ...
  • Another aspect of retirement is lifetime learning. ...
  • Budgeting is more than setting a top-line spending number based on a pre-arranged percentage.
28 Nov 2017

What are the best reasons to retire? ›

7 Reasons You Should Retire Already
  • You're disinterested in the job. ...
  • Your health is suffering. ...
  • You're burned out. ...
  • Technology is causing you stress. ...
  • You have no debt. ...
  • You want to pursue a second act.
29 Jul 2022

What are the first three steps to retirement planning? ›

Here are the basic steps to take when doing your retirement planning.
  1. Step 1: Calculate how much you'll need for retirement.
  2. Step 2: Choose a retirement plan.
  3. Step 3: Select your retirement investments and start contributing.
  4. During retirement: Withdraw funds at a sustainable rate.
  5. The bottom line.
27 Sept 2022

What are the 4 types saving? ›

Four kinds of savings
  • The Emergency Fund. This is your "Do Not Touch"fund. ...
  • The "I can touch"fund. This is for things you know are going to happen, but just not every month. ...
  • "I know what I want, I just need to pay for it"fund. This kind of savings is for a specific goal or purchase. ...
  • Long-term savings.

What are the four tools for saving? ›

These accounts are known as savings tools. There are four common types of savings tools: checking accounts, savings accounts, money market deposit accounts, and cerficates of deposit, ordered from lowest to highest rates of interest typically paid.

Should I keep my money in the bank or at home? ›

It's far better to keep your funds tucked away in an Federal Deposit Insurance Corporation-insured bank or credit union where it will earn interest and have the full protection of the FDIC.

What is the hardest thing about retirement? ›

For many people, the hardest tasks in retirement are establishing a structure and personal relationships to replace what they had in their work environments. Work dictated the structure of their days and weeks for decades. In retirement, that structure has to be replaced.

What makes people happiest in retirement? ›

Older people, in particular, may enjoy a greater sense of well-being because of the availability of Social Security and private pension benefits that provide them with income after they retire. For many retirees, pensions provide a significant percentage of income in retirement.

How do I retire smoothly? ›

Here are six ways you can smooth your way into your retirement years.
  1. Take the time to design and plan your retirement. ...
  2. Make retiring a process. ...
  3. Get clear on your purpose in life. ...
  4. Be intentional about how you spend your time. ...
  5. Create a routine to give you structure. ...
  6. Build social interactions into your everyday activities.
24 Jun 2022

What 3 things might be important to retirees when it comes to choosing where to live? ›

Major factors to consider in a retirement move include cost of living, taxes, amenities, and access to health care.

What does the average person retire with? ›

Average Retirement Income in 2021. According to U.S. Census Bureau data, the median average retirement income for retirees 65 and older is $47,357. The average mean retirement income is $73,228. These numbers are broken down into median and mean to more fully understand the average retirement income.

What is the rule of 70 for retirement? ›

Rule of 70: the employee's age plus years of continuous, full-time service equal 70 or more, and the employee is at least age 55, with at least ten years of continuous, full-time service.

What are the golden years of retirement? ›

Generally speaking, the golden years begin at age 65 and last until age 80 and beyond. However, some experts question whether “golden years” still belongs in our vocabulary because the time span and definition of retirement have changed over the past half-century. “Older Americans live longer now than they did in 1960.

What is the rule of 60 for retirement? ›

You meet the Rule of 60 if your age plus length of service (computed as full years and completed months) equals 60, with a minimum of 10 years of service and no minimum age.

When should you tell your boss you are going to retire? ›

4. Give at least six months of notice. Some employers require as little as 30 days of notice of intent to retire, but it's often a professional courtesy to announce your retirement as soon as you can.

When should I start transitioning to retirement? ›

Once you reach age 65 or meet a condition of release, your account moves into 'retirement phase'.

What should you not do when you retire? ›

Plan for healthcare costs in retirement, pay off debt and delay Social Security until age 70 to help maximize your benefits.
  1. Quitting Your Job. ...
  2. Not Saving Now. ...
  3. Not Having a Financial Plan. ...
  4. Not Maxing out a Company Match. ...
  5. Investing Unwisely. ...
  6. Not Rebalancing Your Portfolio. ...
  7. Poor Tax Planning. ...
  8. Cashing out Savings.

What should I do 12 months before retirement? ›

You'll be retired by this time next year. Here's what to do now
  1. Avoid the headlines and maintain perspective.
  2. Seek expert advice to cover your bases.
  3. Stress-test your financial plan.
15 Jul 2022

Which is the best month to retire? ›

So as you can see there is a lot of Income Tax to be saved by choosing March as the month best to retire in. As a bonus there is also another good reason to retire at the end of the tax year. You will be going into spring so the weather should be warmer and the nights longer with more you can do!

What is a good retirement message? ›

Retirement wishes for an employee
  • Your dedication and perseverance set the bar for the rest of us. ...
  • Things just won't be the same without you. ...
  • How do you thank someone for so many years of hard work? ...
  • Congratulations and best wishes to a true professional. ...
  • Success is the result of hard work and determination.
30 Aug 2022

Do I have to hand my notice in when I retire? ›

The only difference is that with retirement, you're also requesting your retirement benefits. This means that you need to give notice of retirement to allow your employer to find your replacement.

What is the best age to retire to enjoy life? ›

As a general rule, early retirement leads to a longer and happier life. The optimal age is your mid 50's, when you're still young and healthy enough to enjoy everything.

What age is the best year to retire? ›

Retiring at Age 65 or Earlier

An individual's retirement savings, health benefits, and social security commonly dictate the best time to stop working and vary by age.

What is a realistic age to retire? ›

66-67 – Depending on your year of birth, your Full Retirement Age (FRA) will be between 66 and 67. For example, if you were born in 1955, your FRA is 66 years and 2 months while if your birth year was 1959, your FRA is 66 years and 10 months.

What do you do all day when you retire? ›

23 Fun Things to Do in Retirement
  • Travel. Satisfy your wanderlust! ...
  • Get an education. ...
  • Indulge in a hobby (or three) ...
  • Donate your time. ...
  • Get involved in a sport. ...
  • Set new fitness goals. ...
  • Mentor others. ...
  • Join (or start) a club.
22 Apr 2022

What is the biggest expense in retirement? ›

The biggest expense for most retirees is still housing. This expense category includes: Mortgage payments. Utilities.

How can I keep my mind sharp after retirement? ›

Mental Health Tips to Keep Your Mind Sharp in Retirement
  1. Getting Enough Sleep. ...
  2. Playing with Grandkids. ...
  3. Doing Word Puzzles. ...
  4. Doing Jigsaw Puzzles. ...
  5. Staying Involved in a Creative Hobby. ...
  6. Exercising. ...
  7. Taking Things One at a Time.
4 Oct 2021

What is the best first step to prepare for retirement? ›

Saving Matters!
  1. Start saving, keep saving, and stick to.
  2. Know your retirement needs. ...
  3. Contribute to your employer's retirement.
  4. Learn about your employer's pension plan. ...
  5. Consider basic investment principles. ...
  6. Don't touch your retirement savings. ...
  7. Ask your employer to start a plan. ...
  8. Put money into an Individual Retirement.

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