Successful Transitions Series: Retirement

Life transitions can be complicated, which is why we decided to write a series on how they affect finances and financial planning. This series will look at three major life transitions: retirement, entrepreneurship and career change. Each one is a process, with specific strategies that have been used to make the transitions a success.

Retiring is a major life event. There is no one path to follow in order to ensure a perfect retirement. However, planning and focus have been shown to make a difference when preparing for and entering such a challenging transition.

Planning and Saving Out of the Gate

Experts with Cordasco note that successful retirement transitions began with saving and planning “right out of the gate.”

Some Baby Boomers and alike still may have company pensions and the ‘safety net’ of Social Security to rely on. However, mismanaged pensions and lack of economic consistency with Social Security give pause to the upcoming generations. According to, reserves will be exhausted around 2037, at which time continuing taxes are expected to be enough to pay 76% of scheduled benefits. New legislation will be needed to address deficiencies. Planning for Social Security benefits as a sole source of retirement income may be short-sighted.

Funding Retirement

Frugal spending habits while providing the wanted standard of living have been shown to allow retirees to enjoy a happy and healthy retirement. Recently retired folks who have saved for years notice the transition of their expenses as children move away. Some have more resources, especially if they had been paying for their children’s education. Others, especially those who borrowed against their retirement to pay for their children’s college, struggle. For those without children, priorities often change, and retirees become more cautious, recognizing resources might be more limited. Financial planning can be an integral part of a successful transition in these and other cases, whether there are children involved or not.

Paying attention to the Future

Many times, the psychology of transitioning into retirement is not considered as part of the financial transition. However, budgets, living arrangements, health concerns and estate planning can all tap into fear and anxiety when entering retirement. Sometimes the sudden change of a scheduled life to one full of free time can overwhelm the retiree, and this may include financial over-spending. In the study from the Employee Benefit Research Institute, 45.9 percent of retirees experienced higher spending in the first two to six years of retirement, considered to be the time when retirement blues is most prevalent.

The Institute of Economic Affairs in the United Kingdom surveyed retirees and found that those retirees that prepared for the eventualities of declining health and their estate bounced back from anxiety and depression faster, spending less of their income impulsively and enjoying a happy retirement.

It’s also interesting to note that retirees often don’t think about how spending can change over their retirement years. The first decade, they may be traveling and doing things they planned for during their working years. As they age, these activities may decline in number, so the spending in these areas will also decline.

It is natural to feel nervous about the transition of retirement.  How these fears are dealt with may mean all the difference. Finding a trusted financial advisor who can create a clear picture and compassionately answer your important questions during this transitional time is essential. With a plan designed around your needs, you can retire with peace of mind and enjoy every day.

Wood Smith Advisors, a woman-owned Registered Investment Advisor (RIA), is a fee-only financial services firm that partners with its clients to simplify their financial lives. We focus on women, entrepreneurs and individuals with complex financial situations, providing objective and competent advice, education and services to help them develop and build their businesses and reach their financial goals. We can be reached by clicking here.

“Finance Made Simple” blog posts are intended for educational purposes and not for specific advice. Each person’s situation is different. Consult your financial advisor for advice relating to topics discussed.

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