How to transition from saving for retirement to living

You’ve been a diligent saver for decades, and the moment you’ve been preparing for has finally arrived: retirement.

But as you stand on the threshold of this new chapter, you may find yourself facing an unexpected challenge: going from saving for retirement to actually living in it.

This transformation is more than just a change in your daily routine; It’s a fundamental shift for your financial strategy and mindset.

The key to a smooth transition lies in careful financial planning. As you approach retirement, it’s important to re-evaluate your financial landscape.

Start by getting a clear picture of your expected retirement income from all sources – pensions, NSSF, personal savings, and other investments. Compare this to your projected expenses to ensure you have a sustainable withdrawal strategy.

Where possible, work with a financial advisor to create what some experts call a “retirement annuity,” a systematic way of withdrawing from your various accounts that increases tax efficiency and ensures your money lasts.

They can help you determine the optimal order for withdrawal from taxable, deferred, and tax-free accounts, taking into account your unique financial situation and goals.

It’s also wise to build a cash reserve for a year or two of living expenses in easily accessible accounts. Think of this as a financial shock absorber, helping you ride out market downturns without having to sell investments at inopportune times. This strategy can provide peace of mind and financial stability as you adjust to your new retirement life.

As you move, don’t forget to gradually change your investment strategy. If you invest heavily in the stock market, you may need to take a more conservative approach to protecting your nest egg.

However, it is important to maintain some growth-oriented investments to combat inflation in the long term. After all, retirement can last for decades, and your money must keep up with rising costs.

When it comes to stocks, the rule of thumb is to subtract your age from 100 to get the percentage you should be in stocks.

One of the most important expenses you will face in retirement is health care. As you age, medical costs often increase, making it essential to have a solid plan.

In a transition such as the current one from the National Health Insurance Fund (NHIF) to Social Health Insurance (SHI), it is important to speak to an insurance broker to help you understand the new offer and options to bridge any gap with private health insurance. Take time to understand the different parts and supplemental coverage options for both insurance coverages.

Post-retirement medical fund contributions are another aspect to consider while you are still relatively young and healthy. This will potentially secure lower premiums and protect your assets from being depleted by extended care needs later in life.

For those looking to stay active and engaged while earning extra income, the gig economy offers a wealth of opportunities. If you have a specific skill or area of ​​expertise, consulting or freelance work can turn into a more passive income source while you build a client base and perhaps hire others to handle day-to-day operations.

Freelancing in your area of ​​expertise through online platforms can allow you to continue using your professional skills on your own terms.

Remember, although these income streams are often called “passive,” they usually require some upfront work and ongoing management. It’s best to start developing these income streams before retirement to give them time to grow.

Not only can this be financially rewarding, but it also provides an opportunity to stay mentally sharp and socially connected. The key is to find a balance that provides financial benefits without compromising the freedom and flexibility that retirement provides.

Going from saving for retirement to living in retirement is a journey that requires careful planning and adaptability. With a solid plan, you can create a satisfying and financially secure retirement.

Mr. Wafubua is the Managing Director of Enwealth Financial Services Limited.