How to Retire

do you feel confident about managing your retirement, or does it all feel a bit overwhelming? many people, even with the best intentions, find it confusing to figure out how much to save, when to start drawing from their investments, or how to plan for long-term care. the author, christine benz, experienced this firsthand when she helped her parents manage their finances, sparking a deep interest in simplifying the retirement planning process for others.

in this chapter, you’ll learn how to take control of your retirement by making smarter financial decisions, from simplifying your investments to planning for the future. you’ll also explore what really makes retirement fulfilling – staying healthy, staying connected, and having purpose.

have you thought about what will make you truly happy in retirement? rather than thinking of it as a long vacation, focus on finding what gives you purpose. planning early can help you create a life filled with satisfying activities, whether that’s organizing your home or starting a big project like writing a book.

if you love your work, you might even want to consider part-time hours, holding on to the parts of the job you enjoy and letting go of the rest. it’s also important to strengthen your relationships and health early, just as you’ve been doing with your finances.

now for some nitty-gritty. five years before retiring, start picturing your day-to-day life. if you’re thinking of moving, spend time in your potential new location to see if it suits you. begin creating a realistic budget based on your future plans. 

at the three-year mark, try living on your projected retirement budget to see if it’s manageable. this is also the time to adjust your investments, gradually moving some into cash to make the transition smoother when you start drawing on your savings. while managing the financial side is important, also think about what activities will bring you joy and give you a sense of purpose, especially if you’re no longer working.

when you’re a year away, take care of practical tasks. transfer personal files off work devices and tie up any work-related loose ends. if you’re delaying social security to maximize benefits, ensure you have enough cash to live on. this is also the time to start thinking about how to replace the social connections you had at work. strengthen relationships outside of work to build a strong social circle that will remain with you into retirement.

when it comes to longevity, remember that it isn’t just influenced by genetics; lifestyle actually plays a bigger role. staying active and nurturing meaningful relationships will improve your happiness and extend your life. as you age, your social network may shrink, but the relationships that remain are often deeper and more fulfilling. diversifying your friendships helps protect against isolation as circumstances change. by focusing on both your physical health and social connections, you’ll set yourself up for a long and satisfying retirement.

when planning for retirement, finding the right balance between your current needs and future security is essential. social security plays a big role in this. while you can claim it as early as 62, waiting until your full retirement age will give you the full benefit, and delaying up to 70 increases it by 8 percent each year. if you’re in good health or have a younger spouse, this can be a great way to increase your income. but if you need the money sooner or have health concerns, claiming earlier might make sense.

beyond social security, annuities can provide extra security. an annuity, which is purchased from an insurance provider, offers guaranteed payments to cover essential expenses, reducing the risk of outliving your savings. this additional steady income can bring peace of mind, especially since retirement spending often fluctuates.

spending patterns tend to shift naturally as you age. early on, you might follow the 4 percent withdrawal rule, taking 4 percent of your savings in the first year and adjusting for inflation after that. but research shows that retirees often spend less as they age, particularly in their 70s, due to lifestyle changes. that said, health-care costs may cause spending to rise again later in life. managing these fluctuations is easier with a flexible withdrawal strategy that adapts to market performance. when investments are doing well, you can afford to take out more, but when markets dip, scaling back helps preserve your nest egg.

enjoying retirement also means eliminating stress over small purchases. setting a “worry-free number” – an amount you can spend without feeling anxious – helps with this. for example, if your number is $50, any purchase below that becomes stress-free. you can adjust this number as your income grows. focusing on where your money brings the most joy, like that dream vacation or upgrading your daily routine, ensures you get the most out of your spending.

when structuring your retirement income, it’s important to choose a strategy that fits your risk tolerance. if you’re comfortable with market risk, a total return approach, focused on growth through stocks, might suit you. if you prefer reliable income, consider income protection, which uses social security or annuities to provide stable cash flow. for a balance of safety and growth, time segmentation lets you divide your assets based on different time periods. lastly, the risk wrap strategy offers a mix of growth and protection, using variable annuities that allow you to participate in the market while reducing risk.

when planning for retirement, it’s important to create a solid foundation that ensures your future comfort and security. by making key decisions early on, you can make the most of your retirement savings while reducing stress.

start by evaluating how much you’re spending and whether it aligns with your retirement goals. consider factors such as your age, your tolerance for risk, and whether your focus is on enjoying your wealth or leaving a legacy. these considerations will help determine whether your investment strategy should be conservative or aggressive.

social security gives you a dependable, inflation-adjusted income, so you don’t have to rely as much on your savings. this is especially helpful for keeping up with rising living costs. for your investments, a simple, balanced portfolio can help you handle market changes. keeping things straightforward with a mix of stocks, bonds, and cash makes it easier to manage your finances without constant adjustments.

instead of chasing an optimal portfolio that might be too complex to manage, focus on building one that is simple and sustainable. this approach will allow you to weather market ups and downs without constant adjustments. jl collins, an advocate of financial independence, suggests a minimalist investment plan. he recommends a portfolio consisting of a total stock market index fund, some bonds, cash, and a bit of international exposure. 

simplicity becomes even more valuable as you age, when managing complex investments can become increasingly difficult. keep income-generating assets in tax-sheltered accounts and be flexible with withdrawal rates. paying off your mortgage can also provide peace of mind, especially if your expected investment returns would not exceed the interest on your mortgage.

a practical way to ensure steady cash flow during retirement is the bucket approach, which involves dividing your portfolio into different segments to address specific needs. the first bucket holds cash reserves to cover immediate living expenses, particularly during times when your investments drop in value. the second bucket contains bonds, offering stability for medium-term spending. the third bucket focuses on long-term growth through stocks. for those concerned about long-term care expenses, a fourth bucket just for that can add an extra layer of security. 

structuring your portfolio in this way helps you manage withdrawals confidently, regardless of market conditions, reducing anxiety and helping you enjoy your retirement.

have you ever thought about how your home and lifestyle might need to change as you get older? preparing for retirement isn't just about finances – it also means considering where and how you want to live as your needs evolve.

your home might feel perfect right now, but will it still meet your needs in the future? as you age, mobility challenges could make things like stairs or narrow doorways more difficult. upkeep is another factor: will you be able to manage maintenance, repairs, and costs like taxes and insurance? 

it’s also wise to consider how close you are to family, friends, and health care. staying connected to loved ones and having nearby medical support can greatly enhance your quality of life.

financially, retirement can be full of uncertainties, like a sudden medical procedure or rising prescription costs, as well as market shifts. instead of worrying about what you can’t control, focus on what you can. start by tuning out daily market noise and sticking to a set schedule for reviewing your investments – like an annual check-in. lowering expenses, such as investment fees, can also help your savings go further. and you can stay adaptable by knowing which expenses are essential – like housing costs, and where you can cut back if needed – like dining out. 

your transition to retirement doesn’t have to happen all at once. gradually reducing your work hours can make the adjustment smoother, both emotionally and financially. practicing how you’ll spend your money before fully retiring can also help ease the shift. this might mean buying a car or planning a major home renovation from your savings while you’re still working. 

beyond finances, it’s important to plan how you’ll spend your time. having a clear picture of your daily activities makes retirement feel more concrete. traveling might sound appealing, but consider what you’ll do during the rest of the year. structuring your days can help prevent boredom and keep you feeling connected. 

the final point you need to consider as you prepare your retirement is what your goals are. is it more important to you to fully enjoy your retirement now, or would you like to leave something for your loved ones in the future?

women often face unique challenges when planning for retirement. career breaks to care for family members can lead to lower earnings and savings, as well as smaller social security benefits. women also tend to live longer than men, which means their savings need to last longer. that’s why it’s important to start saving early and focus on investments that can grow over time.

women are more likely to care for others throughout their lives, including children, aging parents, and potentially a spouse that they outlive. in many cases, there may be no one left to provide care in return, showing the importance of having a long-term care plan. this could involve using community resources, assisted living options, or securing financial support.  for single women, particularly those without children, planning for long-term care is even more important due to a lack of immediate family to offer support.

when investing, women should avoid being overly conservative, which often means holding too much in low-risk assets like cash or bonds. instead, a balanced approach that includes growth-focused investments, such as stocks, can help keep up with inflation and support long-term financial goals. holding a significant portion of assets in cash can lead to missed growth opportunities, making it difficult to keep up with inflation and maintain financial stability over the long-term. investing in stocks, while riskier in the short term, has historically been a reliable way to build long-term wealth – an approach especially relevant given women’s longer life expectancy.

getting the right financial advice is important for women due to the unique challenges they face. it can help to seek an advisor who is fee-only, certified as a financial planner and also a fiduciary, which means they are legally required to act in your best interest. the advisor should genuinely listen, understand the full financial picture, and assist with all aspects of financial life – not just investments, but also decisions involving taxes, housing, and family needs.

talking about finances with your family might feel awkward, but avoiding it can cause more confusion later. sharing your plans ensures your family knows what to do if something happens to you. 

start by organizing your financial accounts – this includes access details and instructions for managing them. make sure trusted family members can access this information when needed. it’s also smart to have an estate plan in place with powers of attorney for health care and finances. don’t forget to share personal wishes like memorial arrangements or who should care for your pets. these conversations may be tough, but they’ll make life easier for your loved ones down the road.

as you begin thinking about retirement, it’s natural to reflect on your life and what remains important. one way to do this is through a life review, which can help you identify areas that need attention – whether it’s mending relationships or finally pursuing those goals you’ve put off. remember that leaving your career doesn’t have to mean losing a sense of identity. stay involved in activities you find meaningful, whether professionally or in other areas like volunteering. this will help you maintain a sense of purpose.

that purpose doesn’t need to be something monumental. small, meaningful actions – like fostering a stronger connection with a partner or reconnecting with passions from your childhood – can bring just as much fulfillment as a great act of philanthropy. if there are relationships that need healing, taking the initiative to reach out can be rewarding, even if it doesn’t go as planned. 

above all, it’s never too late to start shaping the kind of life you want in retirement. by taking small, intentional steps now, you can move closer to the vision you have for your future.

in this chapter to how to retire by christine benz, you’ve learned that retirement planning involves more than just finances. you’ll need to simplify your investments, understand social security and annuities, and create a budget that supports your future goals are key elements. important investment strategies include gradually adjusting spending and investments as retirement nears, preparing for health-care costs, and planning for long-term care. women, in particular, should focus on growth-oriented investments to account for longer life expectancies. 

and be sure to communicate with family about your financial plans and personal wishes, along with establishing an estate plan. this will ensure smoother transitions and peace of mind for everyone.

okay, that’s it for this chapter. we hope you enjoyed it. if you can, please take the time to leave us a rating – we always appreciate your feedback. see you in the next chapter.