Many investors nearing retirement are beginning to focus on life after work.  Questions arise that can be difficult to answer, such as:

  • How much savings is enough to retire?
  • What sources of income will I have after I stop working?
  • How do I construct a portfolio to fund spending goals?
  • What will I do with my time?
  • When should I apply for Social Security?
  • Lump sum vs. pension payments?

Here are my four steps to a successful retirement experience:

1)  Have a plan

The most successful retirees have a well thought-out plan before retiring.   Write down your goals.  If you have a spouse, each of you may have differing goals.  Write them all down and decide which ones take priority and come to an agreement; memorialize your goals in a document.  Decide on a sustainable withdrawal rate from your portfolio and an asset allocation that takes into account how much risk you are willing and able to take to achieve your spending goals.  You will also need to consider taxes, legacy and estate plans, long-term care needs and risk management.

2)  Create a “retirement paycheck”

Set up direct deposits of all income sources, such as a pension and Social Security.  Add a recurring transfer of funds from your investments (IRA or Brokerage account) to supplement your fixed monthly income sources.  Don’t be afraid to set up recurring payments of all your monthly expenses to eliminate the need for check writing and mailing.  Automate and free up your time for more important things to do in retirement.  It’s also a great idea to consolidate all of your various accounts with one custodian.

3)  Find a new passion

Once you have the financial part of retirement under control, you will need to address your personal goals.  You need to retire TO something, not just FROM something.  Spend some time considering what you will want to do with your free time.  Options include working part time in your current field, paid work in a new field, volunteering, traveling or just relaxing at home.  Everyone has a distinct path that is right for them, but surveys suggest the most satisfied people continue to have a passion for something in their life.

4)  Balance, outsource & simplify

Some people enjoy managing their retirement portfolio, while others prefer to work with a trusted advisor to free them up to focus on their personal goals and priorities.  Either way, there are many ways to simplify your financial life and minimize time devoted to finances.  Lack of organization often creates unnecessary stress that can be unhealthy.  Decide which tasks you can do on your own and which tasks you would gladly pay to outsource to someone you trust.

In my experience, working with many pre-retirees, these are the four critical steps to a successful retirement experience.  Add in some investing and spending discipline and you can confidently move from a life of work to a life of whatever you choose!