Five Ways to Make Retirement a Little Less Scary
To avoid lying awake at night once you’re retired, consider having these strategies in place before you take the plunge.
On July 10, 2023, I walked out of my old office for the last time. Upon my departure, I gave up a lot of my identity. I spent eight years with the firm and was one of four owners. I lost some relationships. No, I didn’t lose friends or leave on bad terms, but I walked away from the thing that connected us and the daily social interaction it facilitated. I said goodbye to the daily structure.
And, oh yeah, I gave up a nice paycheck. No matter how much money you have in the bank, how well prepared you may be, that’s scary. And while I wasn’t retiring, almost every retiree faces these same challenges.
Below are a few strategies to help you sleep better at night in your first few years of retirement.
Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
1. Retire “to” not “from.”
I drove from my old office to my new one. I didn’t stop at home. I didn’t stop for coffee. I don’t even think I listened to the radio. And I wouldn’t advise this. I encourage my clients to take some time to breathe. Do the home projects you’ve been putting off for 30 years. Spend time with your grandkids. Take that trip.
When I arrived at my new office, I had my new identity, much the same as my old. Professionally, I am a financial planner, an owner and an entrepreneur. The gig economy has made it much easier to work when you want, how you want, in the industry you are passionate about. The most important thing about retiring “to” something is that you know who you are. Remember: “Retired” says only what you don’t do. Make sure you know what you do do.
Now, I know you’re asking, “How does this make things less scary?” Two reasons. First, being busy inherently reduces stress. Second, many of the things that people retire to pay something. Probably not what you’re used to, but they take stress off your portfolio, and your shoulders, between retirement and Social Security.
2. Cash is king.
Not in an investment sense and not forever. I often encourage retirees to have a year’s worth of expected expenses in the bank, including any one-time, big-ticket items. That’s much more than the three to six months you’d read about in a personal finance textbook.
It’s really uncomfortable to watch your checking account deplete without the bi-weekly refills. One strategy that may help is to hold that year’s worth of expenses in a savings or money market account that deposits the exact amount of your old paycheck into your checking account every two weeks.
3. Have a financial plan.
Think of your financial plan as your gas gauge. It will tell you how far you can go without running out. Ideally, you have many more miles than you plan to drive. A proper financial plan will also address cash flow, risk management, investments and estate and tax planning.
However, the core thing you want your financial plan to tell you is this: “You’re going to be OK.” That will certainly help you sleep at night.
If you want reaffirmation of your plan, you can check your numbers for free here.
4. Have an appropriate asset allocation.
Your investments are the actual gas in the tank. Cerulli Associates and other financial firms have long documented the difference between “investment” returns and “investor” returns. The latter typically are much lower than the former because we are human beings. We buy at highs and sell at lows. Vanguard’s Advisor’s Alpha study highlighted behavioral coaching as the most valuable service financial advisers provide.
Much of this panic selling is due to having a portfolio that made much more sense in your 30s than it does in your 60s. Weekly, I come across Baby Boomers who have more risk in their portfolio than I do. I am 37. A subsequent article will serve as a guide to find your appropriate asset allocation. In the meantime, you can use this free tool to gauge how much risk you’re comfortable with.
5. Have an income plan.
Throughout your working career, if you’re an employee, you have an income plan. It’s your paycheck, and it’s probably as steady as your job. In the last 15 years, I can count on my two hands the number of pre-retirees who have an income plan for the next chapter.
The financial plan tells you how much you can spend every year. The income plan tells you where it’s going to come from every month. When I started my own firm, I knew that I had two years of runway, literally making no money, before I would run out. My financial plan told me that. Where I would draw excess money for expenses was part of my income plan. Fortunately, things ramped up quickly, and there were only a few months where this was necessary, but the fact that I had a plan meant I could sleep soundly.
Related Content
To continue reading this article
please register for free
This is different from signing in to your print subscription
Why am I seeing this? Find out more here
After graduating from the University of Delaware and Georgetown University, I pursued a career in financial planning. At age 26, I earned my CERTIFIED FINANCIAL PLANNER™ certification. I also hold the IRS Enrolled Agent license, which allows for a unique approach to planning that can be beneficial to retirees and those selling their businesses, who are eager to minimize lifetime taxes and maximize income.
-
5 Steps to Take to Get Money Back from a Trip Gone Awry
Five steps to take if travels go awry and you need to get money back.
By Becca van Sambeck Published
-
Avoid Retirement Regrets: Five Facts to Learn Now, Not Later
Is your retirement planning full of holes? Unless you fully understand a few key points, you could be setting yourself up for some surprises.
By Jenna Lolly, CFP® Published
-
Avoid Retirement Regrets: Five Facts to Learn Now, Not Later
Is your retirement planning full of holes? Unless you fully understand a few key points, you could be setting yourself up for some surprises.
By Jenna Lolly, CFP® Published
-
Four Do’s and One Don’t to Help Protect Your Inheritance
If you’re lucky enough to inherit a lot of money, keeping these five things in mind, especially knowing the tax implications, could head off some regrets.
By Brian Gray Published
-
Four Considerations for Moms Leaving the Workforce
If you want to make the transition from a full-time job to being a stay-at-home mom (or dad), here are some issues to keep in mind.
By Mindy J. Oglesby, CFP®, NSSA®, IRMAACP Published
-
Retired and 'Stuck' With a Mortgage Below 4%? You Have Options
You may feel like a mortgage prisoner, but your options may be more doable than you think.
By Evan T. Beach, CFP®, AWMA® Published
-
Considerations for Americans Who Want to Move to Europe
Relocating to Europe for retirement or just because could be more complicated than you might think. Here are a few things to think about.
By Alex Ingrim, Chartered MCSI Published
-
Three Details That Matter for a Successful Retirement
Many people skip over retirement planning specifics that could help them create a stronger plan that would better match their needs. Here’s how to not do that.
By Mark Gelbman, CFP® Published
-
How to Take a Break Without Breaking the Bank
Setting savings goals and a budget and including the kids in the planning can make your vacation more relaxing and less stressful.
By Jared Elson, Investment Adviser Published
-
Guide to Military Benefits for Retirement, Pay and Savings
Benefits for those who serve in the U.S. military can sometimes be complex and confusing. Here’s what to know about how to optimize some of them.
By Zach Mindel Published