Vanguard Explains the Key Step Before You Retire

Many people spend years contributing to retirement accounts without thinking carefully about how they will recognize the right moment to stop working. But retirement is about more than a savings target, since many retirees find that loneliness or a lack of purpose can become real challenges once they leave the workplace.

That is why it helps to be sure you are fully prepared for the next stage of life before making the move. Vanguard highlights three questions, beyond financial readiness, that people should consider before retiring.

Retirement readiness means more than a large nest egg

Vanguard notes that retirement looks different for everyone.

Being prepared also involves more than having enough money set aside. Moving from a steady paycheck to living on fixed income can be a major transition, and handling that shift well is part of building a retirement that works both financially and emotionally.

These are three questions future retirees should ask themselves.

How will you spend your time?

The first question is how you want to use your time. Some retirees enjoy traveling, taking classes, and staying physically active. Others see retirement as a chance to volunteer more and contribute to their communities.

Some people choose to start a business or take on part-time paid work. In fact, 74% of workers expect to have some kind of paid work in retirement, according to the Retirement Confidence Survey.

Many others spend more time with family and friends, or enjoy activities like sports and cards.

Whatever path you choose, it is worth thinking through how you want your days to look before you stop working. That can make the change to retirement feel less abrupt.

Where do you want to live?

According to an AARP survey, 75% of people over age 50 want to remain in their homes after retiring. Still, some retirees may decide to move to another part of the country. Certain states offer more retirement-friendly tax treatment, which can be appealing.

Downsizing can lower housing costs, and some people simply want to live somewhere with better weather. Thinking about where you want to settle can make retirement planning easier.

When do you want to retire?

Once you have a better sense of the lifestyle you want and where you want to live, it becomes easier to estimate when retirement might make sense. Some people can leave work earlier if they plan to downsize and move to a less expensive area.

Others may decide they want a more comfortable retirement lifestyle and need to work longer to afford it. In the end, the timing is personal, but these questions can help you decide when it may be time to stop working.

Delaying Social Security can raise future income

Although many people focus on 401(k) balances, Social Security can also be an important source of retirement income. Benefits can begin as early as age 62, but they generally increase by about 8% a year after full retirement age until age 70. That is why many people wait before claiming them.

If you are married, it is wise to discuss with your spouse the best timing for each of you based on your ages and retirement goals.

Try living on a retirement budget before you leave work

If you want to see whether your retirement budget is realistic, Vanguard suggests trying it while you are still employed. That means spending only what you expect to have available each month in retirement and saving the rest.

Doing this can help you judge whether your planned income will be enough or whether you need to rethink your expected spending.

Seek help from a financial planner if needed

If retirement planning feels overwhelming and you are unsure when you will be ready, a financial planner can help. They can review your numbers, offer tax guidance, and ask the kinds of questions that may clarify your plans.

Bottom line

Being financially ready for retirement involves more than reaching a target savings balance. It also means thinking ahead about how you will spend your time, what your daily life will look like, and where you want to live. Planning those decisions in advance can make the transition into retirement much smoother.

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