During your working years, retirement can feel like a distant, far-off time in your life that you hope to get to someday. And though you may think of it simply as the point when you stop working, it’s a major life transition that shifts how you spend your time, how you define your purpose, and how you live day to day.
And though the financial planning side of retirement is likely the one you’ve focused on most, personal preparation is just as important. With that in mind, let’s look at some of the steps you should take so that when the time comes, you’re fully prepared to retire both financially and personally.
The Three Phases of Retirement
Retirement isn’t a single, static phase—it evolves over time. A helpful way to plan is to break it into three general stages:
- The Go-Go Years: These are the early years of retirement, when you’re typically the most active and healthy. This is when many people prioritize travel—especially international trips—physical activities like golf or pickleball, and quality time with family. These years often involve higher spending because you’re doing more.
- The Slow-Go Years: As time passes, you may begin to slow down. Your lifestyle becomes a bit more relaxed, and you may scale back your travel plans and physical hobbies as health becomes more of a focus. Spending often stabilizes or begins to decline during this phase.
- The No-Go Years: Later in retirement, your mobility and independence may decrease. You may have to limit or stop travel and other physical activities, and you may need to simplify your living arrangements. Spending can rise in this phase as the need for healthcare and support increases.
Understanding these phases can help you better anticipate how your time, energy, and expenses will change throughout retirement.
What Should Retirement Look Like for You?
Before diving into the numbers, take a step back and imagine your ideal retirement. Do you see yourself traveling the world? Spending more time with family? Volunteering for your favorite nonprofit? Taking up new hobbies?
There are no right or wrong answers, but the way you envision your retirement could impact the way you spend and save in retirement. And if you’re married or in a relationship, it’s important to make sure you’re on the same page as your partner. If you want to travel the world but your spouse wants to spend more time at home with the grandkids, it’s best to sort out that misalignment before retirement.
One often-overlooked aspect of retirement is the personal adjustment. Leaving the workforce means more than just losing a paycheck. For many retirees, it can mean losing structure, routine, and even identity. Work provides a built-in schedule and a sense of accomplishment for many people, and without it, they may struggle to fill their days in a meaningful way.
Many people also underestimate how much of their social life revolves around work. Once you retire, those regular interactions disappear—you may go from seeing the same people five days a week to not seeing them at all. How do you plan to sustain those connections or create new ones once you’ve retired?
The run-up to retirement can be an ideal time to start planning for what your life will look like with work out of the picture. Start exploring hobbies or group activities you might enjoy, or sign up to volunteer at a local nonprofit. You could also consider easing into retirement instead of stopping abruptly. A year or two of working part-time could give you an opportunity to “test drive” retirement and see what needs to be adjusted before you step away completely.
Retirement is also an opportunity to consider relocating. It might make financial sense to downsize to a smaller home, or to move somewhere closer to family or with a milder climate. To stretch your savings further, you could also consider a state that doesn’t tax distributions from 401(k)s and IRAs or doesn’t have an income tax.
Define Your Retirement “Number” and Start Preparing
Once you know what you want your retirement to look like, that’s when you can shift your focus to determining how much you need to retire. Your retirement “number” depends mainly on your lifestyle goals. To estimate it, you need to consider how much you expect to spend each year, how long your retirement may last, and what sources of income you’ll have. Without a clear target, you could risk running out of money in retirement or working longer than necessary and missing out on valuable free time.
You might expect your expenses to drop in retirement, with your lifestyle simplifying and your children out of the house, but many retirees experience the opposite. Many people put off major purchases until retirement—say, a boat or a sports car—or find that their new golfing or traveling habit is more expensive than they expected.
And in retirement, you’ll no longer have the security of a regular paycheck every couple of weeks. As you shift from earned income to generated income, you’ll have to rely on multiple income sources, such as Social Security, withdrawals from retirement accounts or pensions, and investments. But just having these income sources isn’t enough—you also need to consider planning so you can utilize them effectively. Depending on your situation, it may make sense to delay claiming Social Security or to convert money in a traditional IRA into a Roth IRA.
We believe you also need to plan for long-term care and unexpected costs in retirement. If you retire before age 65, you’ll need to cover your own health insurance until Medicare begins. And even after enrolling in Medicare, there are still out-of-pocket costs to consider. Long-term care is another major factor. Whether it’s in-home care, assisted living, or nursing care, these expenses can add up quickly—and they’re typically not covered by Medicare. You may need to cover long-term care through insurance, savings, or a combination of both.
As retirement approaches, it can also be important to reassess your overall financial picture. Do you want to enter retirement debt-free? Paying off a mortgage or other liabilities can help reduce financial stress and lower your monthly expenses. You may also need to shift your investment strategy from a focus on growth to preservation and sustained income. And the run-up to retirement can also be an ideal time to make sure your estate plan is up to date. You should review your will and beneficiary designations, consider trusts or powers of attorney, and make sure your wishes in the event of death or incapacity are clearly documented.
It’s Never Too Soon to Start Preparing
Retirement planning isn’t something you can do effectively at the last minute. It requires time, thought, and ongoing adjustments. By starting with your personal goals and aligning your financial decisions around them, you can start preparing for a retirement that matches the life you want to lead.
A financial advisor can help you build your plan and determine whether you’re on track. Schedule some time with one of our advisors to help make sure you’re prepared.
The opinions contained in this material are those of the author, and not a recommendation or solicitation to buy or sell investment products. This information is from sources believed to be reliable, but Cetera Wealth Services, LLC cannot guarantee or represent that it is accurate or complete.
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