How to retire

It's a funny kind of question isn't it, 'how to retire' ? But as the years pass, the question of retirement tends to percolate up and attract a bit more of our attention; even appear more prominently or frequently in our minds.

Rather than being happy to leave questions like 'how to retire' for another day, we begin to want to get more clarity. Instead of simply moving on to think of other, more pressing issues, questions begin to form. Such as – when do I want to retire; when can I retire; what do I want to do with that time; and how do you retire anyway?

Getting clear on your plans for your later years

The first step is to get some clarity, not only on what pension arrangements and savings you may have in place but, equally important, how you ‘see’ your retirement. What goals do you have for your later years, what kind of lifestyle are you hoping/planning for post-retirement. Do you want to travel the world and take on new challenges and adventures, or do you picture a more tranquil life of gardening and quality time with grandkids?

For more thoughts on working out what you want to do in your later years, see also 7 steps to creating a fulfilling retirement.

More than likely you’ll be thinking of a life which includes both a measure of adventure but also time and space to relax. Or perhaps you have a specific project or projects in mind. Whichever it is, determining your lifestyle goals will help you plan more appropriately and give you a clear-sighted idea of a budget that will meet your everyday needs while also providing opportunity for the adventures you’ve always dreamed about.

Lifting the lid on your financial planning

With an idea of the kind of lifestyle you want, you have a clearer framework for looking at the financial aspects of your retirement. Getting a grip now on your finances can make a big difference towards being able to pursue the life you want in retirement.

To do this you have to lift the lid and look at what you have currently in place financially. It can be tempting to continue to put this off, preferring to push it all to the back of your mind again and focus on the here and now. But, generally, once you start the going gets easier and knowing the facts dispels the fears that can be fuelled by uncertainty alone.

Investigate your current financial landscape, including your income, expenses, savings and investments to establish your financial readiness for retirement. Knowing what you currently spend monthly will help you get a realistic idea of the cost of your current lifestyle. That said, some expenses may be lower or disappear altogether when you stop working. For example, no more commuting or need for work clothes, you’re no longer paying into your pension, and so on.

Clarity helps to dispel fear

Which brings us on to pension arrangements. You'll need to understand your pension entitlements and how they will support your retirement lifestyle. This knowledge allows you to fine-tune your plans or make adjustments if needed. It’s never too late or too early to work on your retirement plan; in fact, the sooner you start planning, the more prepared you can be for your later years.

Defined contributions pensions, state pensions, and private pensions are some of the pension types you may have in place; you may have different pension pots and/or pension schemes relating to different periods and employers in your working life, so this may take some unearthing. In the UK you can track down any ‘lost’ pensions using the free Pension Tracing Service (or call (call 0845 6002 537). This service is provided by the government and is free.

There may also be an opportunity to merge or ‘consolidate’ your pensions, combining them into one. This makes it easier to keep track of your pension entitlements and may save money on management fees and the like. This is a question to investigate with your financial adviser.

Debt is another key issue to tackle in the journey towards successful retirement. Where possible, do your best to pay off all your debts before retiring. This act is a significant step, putting you in a stronger position financially during your retirement years.

Health and well-being

Gaining confidence in the financial realm is just one part of the equation. Getting in shape both physically and mentally are also a crucial part of retirement planning. Regular workouts, balanced nutrition, and connecting with loved ones can significantly improve your well-being in retirement.

Also consider your future healthcare needs, and should your finances allow, ensure that your insurance can cater effectively to avoid unforeseen health-related expenditures.

Financial advice for retirement planning

The retirement planning process is no small task and reaching out for professional help can be sensible. A good financial advisor can guide you through the complex part of retirement planning and help in devising a tailor-made, realistic financial plan based on your goals and available resources.

Timing when to start collecting on your pension(s) and any social security benefits (where applicable) can also make a difference. Delaying a few years can in some cases significantly increase your monthly payout.

Taking action now

Don't underestimate the impact of downsizing your current lifestyle. This intentional act can go a long way in helping you save more towards your nest egg, translating into a more relaxed retirement.

Retirement does not mean you have to cut back on your passions and interests; they keep you mentally vibrant and physically active. So factor them into your retirement budgeting process. Part-time work, volunteering, or engaging in community service are excellent ways to keep boredom at bay while also contributing to the society during retirement years.

Consider retiring in stages

Revamping your skillset or pursuing an activity that you love might bring about an encore career post-retirement. This can contribute emotionally and financially towards your well-being and continued enjoyment of life.

You can also consider retiring in stages over several years. For example, by easing off on your workload with your current employer, if possible, or by starting something new part-time. You’ll be able to get used to the idea of not working and having more leisure time to fill, as well as not having your identity so attached to your work life.

Keeping your plans up to date

Having reviewed your circumstances and made a plan, make a promise to yourself to review it on a regular basis, for example, yearly. Changes in tax laws or economy, major life events such as kids' weddings, or moving home can also demand adaptations in your plan. Keeping your documents, wills, and other financial papers up to date ensures your financial affairs are organized and will also prevent unnecessary strife for your loved ones in your absence.

How to retire = getting mentally and financially prepared

Mental preparedness is as important as financial readiness. Transitioning into retirement is a significant shift that requires mental, emotional, and psychological preparedness. This shift involves adapting to new routines and lifestyle changes.

In conclusion, learning how to retire involves planning, strategizing, and making informed decisions about your finances, healthcare needs, and lifestyle. It might not be a stroll in the park, but taking these first steps will give you confidence and peace of mind – as well as time to make changes, if needed, so that you have the necessary funds and mindset ready for a happy and fulfilling later life.