Only you can know if you’re ready for retirement in 2025. If you’re 60 or getting there, retirement is no longer a hazy concept in the distance. It’s a real deadline. In five or six years, or maybe just a year. Or six months. Or even six weeks. You are going to leave your full-time job, not for a new phase in a working career, but for a largely unknown future.  Here are some considerations for you.

Accumulation vs. Decumulation:

Ideally, you’ve prepared financially and otherwise ahead of this looming date to ensure a calm, rather than chaotic, transition. The lead-up to the last day requires sharpened focus. What do you need to know about your finances? Your health insurance? When do you tell your boss and colleagues? And how do you leave your job looking forward to a new phase, rather than looking back and longing?

Presumably, you’ve been saving in some combination of retirement accounts, pensions, money markets and brokerage accounts to fund a comfortable retirement, or what we term the “accumulation phase.” It’s now time to decide the best way to leverage those accounts before the last paycheck stops.

First, figure out the total funds in all accounts. On top of that, know what you will accrue monthly with Social Security; that can be easily found by signing up with the Social Security Administration. 

If you want a sense of how your retirement savings measure up to that of your peers, read up on the average IRA balance by age and the average 401(k) balance by age.

Once you have a handle on all the different pots of money, decide before retirement how much you will take from which account, which means understanding the implications of tax brackets. The goal is to balance what you take from different sources to utilize the low 10% and 12% tax brackets.  This is what we refer to as the “decumulation phase.”

The idea is to spend a mix of taxable income (capital gains, dividends and interest) and tax-deferred incomes (IRAs and 401Ks) earlier in retirement. Then, if you have a Roth IRA, save it for last because it’s tax-free. A Roth also doesn’t burden you with required minimum distributions (RMDs), which IRAs and 401Ks do starting at age 73.  Decide what’s going to be the most tax-efficient way to pull it out so your money lasts as long as possible. Never let low tax brackets go to waste in creating your income in early retirement.  The idea here is simple….never run out of money.

Reduce or Eliminate Debt:

It’s a great idea to go into retirement debt-free — if you can manage it and still have some liquidity. It’s critical to have a healthy savings account that can be drawn on in an emergency.  You don’t want to pay off the mortgage and then be living on your IRA, with the taxes that will accrue.

Obviously, if you are one of those that has a mortgage at 2.5% interest, it’s crazy to pay off the mortgage, but if your mortgage interest rate is higher than what you can earn in a savings account, you probably should pay it off.

Health Insurance:  

Retirement at 65 years or older makes things much easier in the health insurance arena since Medicare is available.

If you retire before 65, that’s another matter. The federal law known as COBRA allows someone leaving a company to stay on the company’s health care plan for up to 18 months; however, it is expensive.

Other options are joining a spouse or partner’s health insurance if available or buying it through the markets under the Affordable Care Act. Remember, there is a special limited enrollment period after retirement, so there’s no need to wait until the annual enrollment period.

Life & Disability Insurance:  

If your employer offers life insurance and disability insurance, decide whether it makes sense to replace it out of your own pocket. Life insurance often isn’t necessary if both you and a partner are retired with enough savings and don’t have dependents.  Further, since disability insurance only covers lost income, it’s unnecessary once retired.

Visit Your Doctors: 

Don’t delay doctors’ appointments until after retirement, even if it seems to make sense because you’ll have more time. Rather, catch up on all your doctors’ visits and routine screenings before leaving your job.

This is especially true with vision and dental care because traditional Medicare and many plans offered under the ACA don’t offer such coverage. However, most Medicare Advantage plans include them as extras. If your plan doesn’t have dental and vision coverage, you might want to buy it separately.

Another reason to make sure you’re caught up with all your health needs: the administrative work related to COBRA can take a while to kick in, and during that period, you will have to pay for everything out of pocket, although COBRA does retroactively cover medical costs from the day your company insurance expires. Also, make sure you have extra medication on hand in case it takes longer than expected to move to a new plan.

Unused PTO: 

If your company has a policy of paying for unused vacation days, consider delaying any PTO until after retirement and collecting the money.

Social and Emotional Preparation

Anticipate the future: 

If there’s a universal piece of advice from retirement experts, it’s this: don’t put off thinking about what your retirement will look like until the day you’ve left work. That can be a recipe for some unhappy months or years.

There’s a reason that a TED Talk by Riley Moynes, a former financial adviser, has been viewed more than 3 million times online. It’s about struggling with retirement.  After interviewing dozens of retirees, he says he discovered that most people move through in retirement in four phases — a concept he turned into a book, The Four Phases of Retirement: What to Expect When You’re Retiring.

Game Plan Your New Life: 

Think seriously about how you will replace some of the more intangible benefits of the workplace before you leave.

Once you know you’ve got the money you need to retire, focus on the non-financial benefits that you’re getting at work such as:

• A sense of identity.  You’re no longer the VP, but rather just another retired person
• A sense of accomplishment by starting and finishing projects, for example
• A structured day
• Social interactions. Even if you didn’t hang out with colleagues outside of work hours, there’s usually ongoing interactions during the day that help you avoid loneliness. That can feel like a real loss when it disappears.
• A sense of purpose  that is bigger than simply finishing a project and is more about contributing to something larger than yourself.

We have seen a big difference between people who go all in the last year of work versus those who say, ‘Well, I’m going to really take maybe 10% to 20% of my time and shift it toward things I can do to get a head start on my future.

Use the last year to develop a “non-financial portfolio.”  Rather than financial, it’s a time utilization portfolio with the same principles of diversification and rebalancing your newfound and hard-earned free time.

Change The Narrative: 

How we think about retirement is often connected to how we think about age.  What the broader culture has trained us to think about retirement is decline. It’s really important that we change the narrative that the media, movies and that culture would have us believe — that you become invisible as you age.  A research study of 14,000 adults over 50 found that feeling better about one’s own aging mentally is associated with fewer physical and mental health problems.

You do You, Be yourself: 

With all that said, the most important thing is to know there are many variations of retirement. One of our clients, who worked in healthcare for almost 35 years, prepared intensively for retirement and understood that the social and emotional part was as important as the financial side.  He decided he didn’t have to figure it all out at once. He gave himself permission to not know what he was going to do.  His two years of retirement so far have been wonderful. Gardening, running, taking walks with his wife, helping take care of his grandchild, reading and doing projects around the house have been very fulfilling. He hasn’t felt the need to create more of a schedule or line up activities.  He spent his whole career being very structured.  Bottom line?  You do you.  You deserve it.

Time To Go:

You’ve got everything lined up and now you need to tell the boss. How much notice should you give?  This is not a resignation in pursuit of another job.  The Human Resources surveys suggests two months is the average.  That stated, much depends on the type of job and expectations. The rule of thumb tends to be the more senior position, the more notice is given; in all jobs, at least two-weeks’ notice is considered common courtesy.

Also, be prepared to respond to common questions, such as whether you’re willing to stay longer or work part-time. There is no “right answer here, some agree to stay a few months past their chosen retirement date and some decline as they are ready to move on. 

When should you tell your colleagues and clients? People often worry that co-workers will treat them differently. There is no set time frame for letting coworkers know. It depends on whether a person has sufficient trust that their colleagues will not ignore them or completely sideline them once they know about retirement.  

If you have faith that particularly close colleagues can keep it to themselves, experts say, you might want to tell them earlier than others, so they don’t feel blindsided.  Also, be sure to let your professional network know of your retirement and, if you want, include a personal email where you can be reached.

Transfer The Personal Stuff: 

While there’s the big picture in disentangling from work life, there are also the little details. You may not have access to your work computer and files once you walk out the door, so be sure to take anything you (legally) can and want. Don’t forget your list of professional contacts you may want to reach out to in the future.

If you use a work email for your personal contacts, set up a separate email at least several weeks before leaving and move your non-work contacts into it. This part proved particularly important for Bodkin, who solely used her work email and cell phone for her personal life.

Relax:  

Tell your family and friends what your plans are in the immediate weeks before retiring — before they make them for you.

Made it really clear to those closest to you that you are going to decompress for the first couple of months as you don’t want them asking “what did you do today?’  Go play golf or tennis, read, meet new people and get to know old friends better.

There are bound to be several issues that come up as you’re winding down a major portion of your life. But with the proper preparation, by the time the last day at work arrives, the only remaining question is what type of drinks to serve for your retirement toast.

Contact Us:

If you have financial or emotional questions or concerns regarding your retirement plans, feel free to reach out to us.  This is not what we do but rather who we are.