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The key to a successful transition in retirement lies with several tactics, and preparation – financial and non-financial – is among the most significant, according to one expert.
“The single highest correlation to that success is how much time you spend preparing for retirement – not just on the financial elements, which is obvious, and everyone does it, but not as obvious as the non-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 The Retirement Manifesto Blogthe more time spent planning for both sides of retirement, the greater the likelihood that “you will find those things in retirement that will bring you the sense of fulfillment that you hope to get it after retirement.”
Many would-be retirees don't start thinking about their post-retirement plans until after they leave the workforce. However, Gilbert took a different approach, starting his planning years in advance – a move he considers key to his success.
“It certainly helps,” he said. “It's been shown that the more you do in advance in terms of this planning, the smoother that transition will be.”
So that retirees can make sure they have enough money in order to maintain their desired lifestyle, Gilbert recommended tracking spending before even starting retirement.
“You can't go into retirement without having a good spending baseline,” he said. “It's a math problem, ultimately. And the more variables you can eliminate, the better your plan will be.”
According to Boston College National Retirement Risk Index39% of working age households will not be able to maintain their standard of living after retirement.
In Gilbert's case, he and his wife tracked every expense for 11 months to establish a baseline and then adjusted for retirement by accounting 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 it compares to that estimated spending number,” he said, noting that if it's close, you should be fine. But if it's not close, you'll need to 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 focusing on the non-financial side of retirement.
“I was a real money nerd,” he says. “I was really focused on the numbers.”
However, once he decided his finances were secure and he retired, the time he spent focusing on money completely turned around.
“As that transition happens, you think you're thinking less about the money because you've 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 get me that satisfaction and excitement every day? And it's not the money. Money is a means to an end. But as you start to retire, you start looking for the end and not just the means.”
And that shift came as a surprise to Gilbert. “It's a mind shift I didn't expect,” he said. “It was one of my bigger surprises. It's a pretty common reality that you worry about (money) a lot less once you're settled in.”
Gilbert explained how work often gives people the “big five”: identity, structure, purpose, sense of accomplishment, and relationships.
People who retire have to find a way to replace those. How could they go about doing 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. “That's when you start to recognize (you've) lost these things. Suddenly you have no structure in your life.”
In his case, Gilbert started to replace the “big five” by starting his blog three years before retiring. “I was looking for things that could possibly develop into things that give me satisfaction after retirement,” he said. “So I went after him … and what does that get me now?”
In short, it has given it 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 curiosity.
“Following your curiosity is not a skill set that we've practiced for a long time,” says Gilbert. “So it's rebuilding that muscle and learning to explore and have fun with it and recognize 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 recover in 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 “trial retirement,” spending 10 days together to talk about their goals, the balance between “me time” and “we time,” and u travel options.
It also helped to do regular checkups after retirement to address changing needs and expectations, he said.
Linda Ryall and Todd Nielsen check each other's phones at a charging station at the Issaquah Senior Center in Issaquah, Wash., Friday, Nov. 22, 2024. (AP Photo/Manuel Valdes) ·THE SOCIAL PRESS
Despite all his planning and preparation, retirement brought several unexpected surprises and challenges for Gilbert.
Transitioning from a saving mindset to a spending mindset was more difficult than expected.
“It's hard to move from building your nest egg to using it, knowing it has to last a lifetime,” he said. And that's especially true for retirees who worry about running out of money. “It's a very common tendency to remain conservative (and) underspend.”
In 2024, 67% of respondents retired in a Goldman Sachs survey specified they had too many monthly expenses, while 55% reported credit card debt.
Gilbert suggested using the bucket method to create a retirement income plan as one 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, it includes a short-term bucket, which holds cash or low-risk investments to cover immediate costs (eg, 1-3 years); a mid-term bucket, which includes fairly conservative investments for expenses in the next 3-10 years; and a long-term bucket, 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 exactly as he imagined: He followed his curiosity and explored new interests as he intended.
However, where that mindset has taken him has been completely unexpected. For example, he never thought he would have a dedicated woodworking shop or writing studio, but those came about through unexpected opportunities, such as charity work.
“The biggest surprises – and the biggest excitement – have come from following where my curiosity has led me,” says Gilbert.
He also discovered that he could find fulfillment in retirement by focusing on others. Retirement, he says, is a great time to give back, whether through mentoring, volunteering, or charity work.
“Start looking at people who may not have arrived yet,” he said. “And find a way to use your time to benefit those in need.”
