Retirement expert details ‘highest single correlation’ to success

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The key to a successful transition a retirement lies in several tactics, and preparation, both financial and non-financial, is one of the most important, according to one expert.

“The highest correlation with that success is the time you spend preparing for retirement, not just the financial stuff, which is obvious, and everyone does it, but not so obvious is the non-financial side,” he said. said Fritz Gilbert. , author of “The Keys to a Successful Retirement” and a guest on a recent episode of Yahoo Finance’s Decoding Retirement.

According to Gilbert, who also publishes the Blog of the Retirement Manifestothe more time you spend planning for both parts of retirement, the more likely you are to “find those things in retirement that will give you the sense of fulfillment you hope to have in retirement.”

Many future retirees don’t start thinking about their post-retirement plans until after they’ve left the workforce. Gilbert, however, took a different approach, starting his planning years in advance, a move he considers critical to his success.

“It definitely helps,” he said. “It’s proven that the more you do in advance in terms of that planning, the smoother the transition will be.”

For retirees to ensure that they have enough money to maintain your desired lifestyle, Gilbert recommended tracking your spending before you even retire.

“You can’t retire without a good spending base,” he said. “Ultimately, it’s a math problem. And the more variables you can eliminate, the better your plan will be.”

According to Boston College’s National Retirement Risk index39% of households of working age will not be able to maintain their standard of living in retirement.

In Gilbert’s case, he and his wife tracked all expenses for 11 months to establish a baseline, then adjusted for retirement to account for downsizing, travel and other changes He also used tools like the 4% rule (spending 4% of your portfolio annually) as a guide.

“Look at how it compares to that estimated spending number,” he said, noting that if it’s close, you should be fine. But if it’s not close, you should consider working longer hours or cutting back on expenses.

Gilbert also recommended his “90/10 rule.” Before retirement, the self-described spreadsheet nerd said he spent 90 percent of his time thinking about money and only 10 percent of his time focused on the non-financial side of retirement.

“I was a real money nerd,” he said. “He was very focused on the numbers.”

However, once she determined her finances were secure and retired, the amount of time she spent focusing on money changed completely.

“As that transition happens, you find yourself thinking less about money because you’ve gotten over the issues and you know what you have to spend,” he said. “And you start thinking, what am I going to do with my life? What will give me this satisfaction and this excitement every day? And it’s not the money. Money is a means to an end. But as you retire, you start looking for the end and not just the means.”

And this change came as a surprise to Gilbert. “It’s a mental shift I didn’t expect,” he said. “It was one of my biggest surprises. It’s a pretty common reality that you worry a lot less (about money) after you settle in.”

Gilbert explained how work often provides people with the “big five”: identity, structure, purpose, sense of accomplishment and relationships.

The retirees must find a way to replace them. How could they do it? First, it is vital to recognize the importance of replacing the Big Five, as they disappear once a retiree leaves work.

Many struggle before retirement to find structure, purpose or relationships, Gilbert said. “That’s when you start to recognize that (you’ve) lost those things. All of a sudden you have no structure in your life.”

In his case, Gilbert began replacing the “big five” by starting his blog three years before retiring. “I was looking for things that could turn into things that give me satisfaction in retirement,” he said. “So I chased it… and what does that get me now?”

In short, it has given it a sense of identity, purpose and structure.

That’s why he encourages future and current retirees alike to replace the “big five” by actively exploring their curiosities.

“Pursuing your curiosity is not a skill set that we’ve practiced for a long time,” Gilbert said. “So it’s rebuilding that muscle and learning to explore and just have fun with it and recognize that you’re going to try a lot of things that won’t work … it’s a serendipitous process. It’s not a spreadsheet. But if you get better at it in time” .

Retirement is not just an individual decision, it also affects the whole household.

Gilbert stressed the importance of discussing expectations before retirement. In his own experience, he and his wife did a “trial retirement,” spending 10 days together to talk about their goals, the balance between “me time” and “me time ” and their travel preferences.

It also helped to conduct periodic check-ins after retirement to address changing needs and expectations, he said.

Linda Ryall and Todd Nielsen look at each other's phones at a charging station located at the Issaquah Senior Center in Issaquah, Wash., Friday, Nov. 22, 2024. (AP Photo/Manuel Valdes) — Linda Ryall and Todd Nielsen look at each other’s phones at a charging station located at the Issaquah Senior Center in Issaquah, Wash., Friday, Nov. 22, 2024. (AP Photo/Manuel Valdes) · ASSOCIATED PRESS

Despite all his planning and preparation, retirement came with several unexpected surprises and challenges for Gilbert.

The transition from a saving to a spending mindset was more difficult than expected.

“It’s hard to go from building your nest to using it, knowing it has to last a lifetime,” he said. And this is especially the case for retirees who are worried about running out of money. “It’s a very common tendency to remain conservative (and) to spend little.”

By 2024, 67% of respondents to a Goldman Sachs survey will retire indicated they had too many monthly expenses, while 55% reported credit card debt.

Gilbert suggested using the bucket approach to creating a retirement income plan as a way to address the fear of running out of money. The bucket approach involves dividing your assets into separate “buckets,” each designated for a specific time horizon or purpose.

Typically, this includes a short-term bucket, which contains cash or low-risk investments to cover immediate expenses (eg, 1-3 years); a mid-term bucket, which contains moderately conservative investments for spending over the next 3-10 years; and a long-term bucket, which includes growth-oriented investments, such as stocks, intended to be used more than 10 years before retirement.

Mindset-wise, Gilbert’s retirement turned out just as he envisioned: He pursued his curiosity and explored new interests just as he planned.

However, where this mentality has taken him has been completely unexpected. For example, he never thought he would have a woodworking shop or a dedicated writing studio, but this came about through unexpected opportunities, such as charity work.

“The biggest surprises, and the biggest excitement, have come from following where my curiosity has taken me,” Gilbert said.

He also discovered that he could find satisfaction in retirement by focusing on others. Retirement, she said, is an excellent time to give back, whether through mentoring, volunteering or charity work.

“You start looking at people who maybe haven’t made it yet,” he said. “And find a way to use your time to benefit those in need.”

Every Tuesday, retirement expert and financial educator Robert Powell gives you the tools to plan for your future Decoding retirement. You can find more episodes on our video hub or look at yours favorite streaming service.

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