How to Transition into Retirement
As you think about retirement planning, it’s important to realize that the definition of retirement continues to change and doesn’t have to be limited to a life of watching TV and a lack of work. In fact, many people want to stay dynamic and work in some capacity in retirement, even if they don’t need additional income.
According to a Transamerica survey, the majority of baby boomers in the workforce plan to work in retirement: 47% plan to do so part-time, 8% plan to do so full-time, and an additional 17% aren’t sure. Only 28% plan to not work, but that doesn’t mean they will stop working cold turkey or become inactive. For example, 31% say their dream retirement involves volunteer work, and 49% say it involves pursuing hobbies, so there are a variety of ways to pursue a fulfilling retirement.
Yet many people are worried about retiring, even if they have the financial ability to do so. The transition from having a successful full-time career to facing an open-ended path in front of you—for the next 30 years or however long your golden years last—can be as overwhelming as it is exciting.
But you don’t have to jump straight into retirement. Instead, you can take a phased approach to retirement planning, where you progress from focusing on your career to perhaps reducing your hours slightly and pursuing a side project, to eventually entering full retirement, which can still involve work.
It’s important to establish a transition plan because you could be forced to change your lifestyle sooner than you think due to factors such as family or health issues (even if you have comprehensive health insurance) or being offered a severance package from your company. Even if those don’t occur, you don’t want to pass up enjoying your retirement just because you’re used to your routine and are afraid to stop working.
With a transition plan, however, you’ll be ready to move toward a retirement that gives you a sense of purpose, and with a solid long-term retirement planning strategy in place, the next chapter of your life could be less worrisome.
Ask Yourself Three Questions
To develop a retirement transition plan, we recommend starting by considering three key questions:
1. Do you need to earn income in retirement?
This could be a simple yes or no answer, in which case it’s easier to narrow down your options for what you’ll do in retirement. But if you’re unsure or if you’d like a second opinion on your financial plan and how it aligns with your retirement goals, it can be helpful to speak with a financial advisor. Our team of financial planners in the Richmond, VA area is ready to help. If you need to earn a certain amount of income to maintain your lifestyle, think about what work options would get you there. While it’s becoming less common to transition to a part-time or consulting role with one’s company due to HR rules, perhaps you could use the same skills you’ve built over your career to start a small side business or take on a few freelance clients if that’s possible within your field. You could start by developing a business plan and perhaps take on one or two clients while you’re at your current job. Then once you retire from your current job, you could add a few more until you reach your desired income level. If you don’t need to earn additional income because you have a large enough nest egg combined with Social Security benefits, then your options are broader, as you may be able to take on whatever work appeals to you, regardless of pay. If that’s the case for you, then you can focus more on the next two questions.
2. What are you passionate about?
Between building up your career and raising a family, you may not have had time for a while to explore what you’re passionate about. But to have a retirement that gives you a sense of purpose, it’s useful to dedicate some time to think about what you enjoy, whether that’s golfing, volunteering, getting involved in community or religious organizations, or doing anything else. From there, think about how you can incorporate your passions into your retirement lifestyle. If you need extra income, you can still potentially build your passions into a new part-time job or a business that you start as you transition into retirement. If you don’t need extra income, you have even more options at your disposal, as you could take a part-time job or pursue a hobby based entirely on the appeal of the activity rather than the pay. For example, if you love golf, you could get a part-time job working at a course and playing in your spare time. Or if you’re passionate about being involved in your local religious organization, you could look for volunteer or stipend positions there. As part of our process, our Richmond, VA financial planning firm works with clients to envision their retirement. That would include discussing what you’re passionate about and discovering how you can incorporate those passions into your lifestyle now and as you transition into retirement.
3. What does work mean to you?
Lastly, we recommend exploring your personal definition of work. For some, that may mean being highly productive; for others, that may mean creating something of societal value; and for still others, that may mean something that simply provides income. It could even be a combination of definitions. Whatever work means to you, think about how you can incorporate that into your retirement plan. If work means being productive but not necessarily earning income, then you could create a retirement plan where you spend time on a passion project or volunteering on a regular basis. Or if work means doing something that adds value to others, then you could look for a part-time job in retirement that perhaps differs from your current career but provides you with more fulfillment, such as becoming a caretaker.
Your retirement should be about living your “perfect day” every day. Developing a phased approach can help you see what’s possible. If you’re trying to figure out how to best transition into a meaningful retirement, reach out to the team at Financial Dynamics for some guidance. You can also listen to our podcast where we discuss transitioning into retirement in more detail.
Our group of financial advisors located in Chesterfield, VA (near Richmond) may be able to help you envision a life in retirement that gives you a sense of purpose, and together we could come up with a long-term plan to help you get there.
Schedule a complimentary 30-minute phone call to discuss your personal situation with a financial advisor.