• 7-Minute Article
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  • Mar 21, 2023

How to Start Preparing for the Transition Into Retirement

A financial professional can help you evaluate your retirement goals, timeline, and more.

How to Start Preparing for the Transition Into Retirement

Published: March 3, 2023

Questions this article can help you answer:
  • What do I need to know about the emotional factors of retirement?
  • What do I need to think about if I want to retire early or later?
  • How can my financial professional help me determine if I’m ready for retirement?

For some people, retirement used to mean receiving a gold watch at age 65, but today things are different. Your plans for retirement – from setting your goals to determining your timeline – can be the ultimate reflection of what you want to achieve and what’s most important to you in this next phase of your life.

Creating a plan to get you to and through retirement is essential in helping you feel confident that you can live the retirement lifestyle you want. There are also three other important items to consider: understanding cultural and social influences on your financial goals, preparing for the emotions associated with the transition to retirement, and determining your preferred retirement timeline. Talk to your financial professional to learn how they can help you optimize your plan based on how these important factors can impact your transition into retirement.


1. Revisit Your Retirement Goals

When you started planning your retirement, you likely had certain goals in mind and an idea of what your retirement would look like. Do those goals and ideas still reflect what you want right now? A survey found that one-quarter of people with $250,000+ in investable assets had changed their plan for retirement six times or more.1 Common reasons that may have you rethinking retirement goals include the progression of your career, family events, and changing market conditions.1

Common Factors That Cause People to Change Their Plans for Retirement

How to Start Transition Retirement Graphic

Source: Road to Retirement Survey. TD Ameritrade, January 2020.

The Impact of Family and Friends on Goals

It’s worth considering what circumstances initially shaped your goals. One study showed that 35% of people currently employed had sought advice on retirement planning from family and friends.2 While that can be a safe place to seek opinions, it’s important to remember that their retirement ideas or experiences were shaped by their personal goals and financial situations. Your ideal retirement may match theirs in some ways, but it’s also unique to you, and you may need to take a different approach.

How Your Financial Professional Can Help You

Your financial professional understands that plans for retirement can change and may need to be adjusted. You can use an annual check-in with your financial professional to discuss any new goals you may have or how your life or priorities have changed. Your financial professional can also provide you with another perspective on how your situation may be different from those of your friends and family who might have influenced your plans for retirement. For example, perhaps you’re in a better financial position than your parents were, so you may be able to travel more than you were anticipating. Your financial professional can walk you through how those adjustments may impact your plans and discuss strategies you may want to consider to help you achieve your updated goals.


2. Prepare Emotionally for Retirement

When people think of retirement planning, the financial component is often one of the first things they think about. However, there’s also a significant emotional element to the transition into retirement. For those who find their work fulfilling and whose social networks are connected to their employment, retirement can lead to anxiety, stress, and depression.3

Some couples experience additional challenges related to the emotional aspect of the transition into retirement. For couples who retire at the same time, there’s typically an immediate increase in the amount of time spent together. You may decide to find a mix of shared interests and individual hobbies that gives both of you time to spend together and time to enjoy on your own. For couples who have a staggered retirement, it can still change the dynamic at home. You may want to consider a new approach to chores around the house, especially if the person still working typically did most of the chores before. Preparing for these changes in your home life may help you take advantage of the new opportunities that the transition to retirement offers.

How Your Financial Professional Can Help You

One of the reasons people often find the transition to retirement difficult is they have a vision of what retirement is going to be like, but it’s not necessarily a day-to-day vision. Retirement may give you the opportunity to travel more or allow you to catch up on some home improvements you’ve been planning to make, but what does retirement look like when you’re not traveling or when the project is complete?

If your finances, job, and other responsibilities will allow it, your financial professional may suggest that you take a test-drive of retirement. Taking a month or so for a mini-retirement may help you determine if retirement is what you expected and how you might spend your days. Then, talk to your financial professional about how it went. If you find that you’re already itching for more activity than the mini-retirement provided, you may need to work with your financial professional to re-evaluate how long you want to stay in the workforce full time, whether you want to transition into a part-time retirement where you still work some, or if there are other aspects of your plan you’d like to adjust. A mini-retirement can also give you a good sense of how much money you might spend in an average month as a retiree, which can help you and your financial professional modify your plans, if necessary, to provide for more retirement income.


3. Determine Your Retirement Timeline

Once you’ve determined that your goals are aligned with your desires and you’ve considered whether you may be emotionally ready for retirement, it’s time to assess when you want to retire. This is a decision that is driven by several financial and emotional factors. Keep in mind that your preferred retirement timeline might change. Nearly half of retirees said they retired earlier than they expected, most often because they were financially ready to or they were forced to due to health concerns or changes in their employment.2

Early Retirement Considerations

About 70% percent of people in their 40s and 67% of those in their 50s said they would retire immediately if they had the financial ability to.1 The Financial Independence Retire Early (FIRE) movement has many people considering saving aggressively and curbing spending in order to try to retire as early as possible.4 But there are more considerations than just how much you’ve saved, including:

  • Health care: Early retirees should think about the cost of health insurance if they will no longer be covered by an employer-sponsored plan since Medicare coverage generally doesn’t begin until age 65. Medicare is also individual insurance, so even if you qualify, your spouse may not. If your spouse is still working, you may be able to join their health plan. Other options may include COBRA, which can extend your employment benefits by 18 months or more after you leave the workplace; private insurance; or an individual or family plan on the public marketplace. These options can be expensive. On average, employers pay about 80% of health insurance premiums for their workers, so one way to estimate what you might pay per month is to multiply your current premium by five.5
  • Social Security benefits: The fewer years you work, the less you contribute toward Social Security and the lower your benefits may be. Nearly 90% of people rely on Social Security as part of their retirement income.6 You may need to consider other sources of guaranteed lifetime income, such as an annuity, to supplement Social Security and provide you with protection against market volatility during your retirement.
Late Retirement Considerations

People who feel they may not be financially ready for retirement, or who enjoy their work and have no desire to stop working, may be more interested in a later retirement. Retiring later can have some advantages. If you wait to begin claiming Social Security benefits, your monthly benefit when you do start claiming may be higher. For example, someone born in 1960 or later would typically receive 100% of their monthly retirement benefit if they retire at age 67. If they delay retirement until age 69, they would receive 116% of the original monthly benefit. By waiting until age 70 or later, they would receive 124% of the original monthly benefit.7 People who work longer may also continue to be covered by their employer’s health care plan until they qualify for Medicare.

Delaying Claiming Your Social Security Benefits May Result in Higher Monthly Income

How to Start Transition Retirement Graphic

Source: Retirement Benefits: If you were born in 1960 your full retirement age is 67. Social Security Administration, as of May 2022.

Those who want to work longer may need to consider the emotional side, however. If your friends and co-workers retire earlier than you do, will you miss the social interaction with them in the office and feel like you’re missing out on the experiences they’re having in retirement?

How Your Financial Professional Can Help You

As you work to determine your retirement timeline, your financial professional can show you how different scenarios, such as retiring a year or two earlier or later, may impact your retirement savings and income. They could also show you how a slower transition into retirement, such as moving from full-time to part-time work or leaving the full-time workforce to serve as a consultant or contractor, could impact your plans.


How Your Financial Professional Can Serve as a Trusted Resource

Your financial professional can serve as your trusted resource during all phases of your retirement planning, helping you manage both the financial and the emotional considerations associated with retirement so that you can feel more confident in pursuing your goals and ambitions. Talking to your financial professional about these three important topics will allow you to work together to customize your retirement timeline and approach to retirement in a way that can help you feel more prepared.