6 Expert Tips for Transitioning Into Retirement Successfully

By Robb Engen

PUBLISHED January 30
|
5 MINUTE READ

Retirement is arguably the largest and most challenging transition we'll make in our lifetime. Successful retirees have a retirement plan, are comfortable with their income and investment strategy, and more importantly, have a sense of purpose—a reason to get out of bed every day after leaving their careers behind.

As an advice-only financial planner, I've worked with hundreds of retirees to help them make a successful transition from working and savings mode to leisure and spending mode. Here are some tips to make your own successful transition based on what those retirees have in common.

1. Save More

Ideally, you've been a prudent saver throughout your career. But the final years leading up to retirement are crucial to shoring up your savings and making sure your finances are in tip-top shape.

A perfect scenario is that three to five years away from retirement, you're in your highest earning years, your mortgage is paid off and your kids (if you have kids) are now young adults living on their own.

Flush with extra cash, you can supercharge your savings with additional contributions to your retirement accounts to ensure you're confident and ready for those first few years of retirement.

2. Retire Earlier

Even people in the best financial shape can fall victim to "one more year syndrome"—continuing to work and save long after they have met (or exceeded!) their retirement goals.

Yet, once retired, most retirees enjoy their new lifestyle so much that they regret not submitting their resignation letters earlier.

I get it. There's a lot of anxiety around retirement. Your paycheck stops and you have to rely on your own savings for what you hope is a multi-decade-long retirement.

But that mindset needs to be balanced with the fact that tomorrow is never promised and our good health can't be taken for granted. Why waste what could have been a glorious year of early retirement just to watch your numbers go up on a spreadsheet?

3. Pay Off Your Home

A paid-off home used to be considered the foundation of a good retirement plan. But with rising housing prices and an inclination to "upsize" homes later in life, it's becoming more and more common to carry a mortgage into retirement.

That puts a strain on your retirement savings, especially in those early years when you'd rather take a bucket list trip, buy a new car or help your young adult children financially.

Successful retirees try to align their mortgage payoff date with their planned retirement date, if not sooner. Certainly, as cash flow improves in your higher earning years, you can direct more of it toward your mortgage to pay it off faster and make sure you're debt-free in retirement.

4. Have a Shared Vision With Your Partner

Couples need a shared vision of how they want to spend their golden years together. Talk about it before you retire, because one spouse's vision of sleeping late and golfing every afternoon might not line up with a more adventurous spouse's desire to travel and explore new hobbies.

Indeed, communication is key to any good relationship—especially for such a significant life event like retirement.

How do you envision your retirement years? Where do you want to live? What's on your travel bucket list? Who are your closest friends? What types of hobbies are you into? Do you want to work part-time or volunteer?

If you want retirement to last 30 years or more, don't you think it's worth talking about how you plan to spend your time?

5. Find Purpose Outside of Work

The Japanese call it your ikigai, which boils down to finding your sense of purpose. Something that drives you to get out of bed and live your best life in retirement.

This could be volunteering, working part time, writing, painting, starting a business, training for a marathon, etc.

Too often, we define ourselves by what we do for work. We wrap our entire identity up in our careers. But what happens when your career is over and you transition to a new chapter called retirement?

The transition can be too much for some people. They last a few months and then go back to work. Worse, they slip into a depression and/or their health deteriorates.

Successful retirees have a sense of purpose outside of work. They've found something that they enjoy doing, that they're good at and that the world (or at least their community) values. Find that sense of purpose and you'll wonder why you didn't retire sooner.

6. Spend More During Your Working Years

One common and interesting theme I've found with many of my retired clients is that they have a hard time shifting from savings mode during their careers to spending mode in retirement.

This type of money anxiety leads to underspending in retirement. If they knew that all of their years of savings would lead to living the exact same lifestyle in retirement, perhaps they would have spent a bit more on experiences and hobbies during their working years.

Consider a couple who are excellent savers and live comfortably on $50,000 per year. They save and invest aggressively throughout their careers, with the goal of being able to spend $100,000 per year in retirement.

Fast-forward to their retirement years and they can't bring themselves to spend much more than they did during their working years. They've never exercised their spending muscles.

Meanwhile, retirement brings with it a host of psychological difficulties, including a feeling of scarcity or that you'll run out of money.

What if, instead of spending $50,000 per year during your working years (with the hope of spending $100,000 per year in retirement), you spent $75,000 per year throughout your entire lifetime (adjusting for inflation)? This is what economists call consumption smoothing, and what I like to call maximizing your life enjoyment.

Final Thoughts

Successful retirees have prepared both financially and emotionally for the next chapter of their lives. They used their final working years to ramp up savings, but they knew when to walk away and call it a day. They paid off their home a couple of years before retirement.

More importantly, they talked to their partner and created a shared vision of what retirement might look like, and they found their sense of purpose and reason to get out of bed.

Finally, they acknowledged that their spending habits weren't likely to be that much different than they were during their final working years. Now, they spend intentionally on the things that bring them joy and cut back on the things that don't matter.

Have you thought about your own transition to retirement? What does it look like? More importantly, have you created a savings plan to get there?

Robb Engen is a leading personal finance expert in Canada and the co-founder of Boomer & Echo, an award-winning personal finance blog. He is a fee-only financial advisor who helps clients at different ages and stages get their finances on track and prepare for retirement. He's also regularly quoted or featured in top financial media, such as The Globe & Mail, MoneySense, The Financial Post, CBC and Global News. Robb lives in Lethbridge, Alberta, and is the married father of two young girls who keep him very busy.

RETIREMENT PLANNING