Retirement is a difficult transition. Retirement Readiness is the key to making it easier.
As I was preparing for retirement, I talked with some of my co-workers who retired before me.
Many commented on how difficult the transition was. Wanting to avoid that in my retirement, I did a lot of research. I discovered that retirement readiness is the most important thing you can do as you prepare to cross “The Starting Line.” The effectiveness of that planning has the highest correlation of any factor in determining how smoothly your transition into retirement will be.
But what does retirement readiness mean? What does it look like? How do I know if I’m prepared?
Most people think it’s all about the money when deciding when to retire. Don’t be one of those people.
As I often say, “The money side is necessary but not sufficient.” To be fully prepared for your transition into retirement, it’s critical to include non-financial aspects in your planning, such as…
- Replacing relationships you’ll lose from work.
- Adjusting to spending 24 hours/day with your spouse.
- Dealing with your loss of identity.
- Creating the right amount of structure to your day.
The one piece of advice I give to anyone who asks how best to achieve retirement readiness is this:
“Spend as much time as possible planning for both the financial and non-financial aspects of retirement.”
That’s nice, but what does it mean?
If you’re asking that question, today’s post is for you.
Below, I’ll lay out three different levels of retirement readiness, from Basic to Advanced. For each level, I’ll outline the traits and milestones you’ll need to accomplish to achieve that level. In the next few moments, you’ll know exactly where you stand on the Retirement Readiness scale, and what you need to do to achieve Level 3.
How do you know if you’re ready for retirement? Have you achieved Level 3 on the Retirement Readiness scale? If so, you’re ready. Share on X
Level 1: Basic Retirement Readiness (Just Getting Started)
I know many people who transitioned into retirement from Level I on the Retirement Readiness scale. Sure, they made it, but they’re typically the ones who have the most difficult transitions. Often, these folks are “forced out” unexpectedly and never saw it coming. Sometimes, they’re just procrastinators. They’ve been thinking about retirement, but figure it’s easiest to wait and figure it all out when they’re done working.
They’re wrong, as they’ll eventually realize when they deal with Phase II about a year after retiring. Do yourself a favor and look at Levels 2 and 3, identify the gaps in your planning, and invest the effort now to fully prepare for retirement.
Your future self will thank you.
Financial Traits:
- You have some savings but no clear retirement plan.
- You plan to rely mostly on Social Security or employer pensions but haven’t done the hard math.
- You haven’t calculated your retirement expenses or income needs.
- Debt (mortgage, credit cards, loans) is still a major concern.
- Healthcare and long-term care planning are not yet addressed.
Non-Financial Traits:
- Your identity is still tied to your career, and you haven’t considered what life looks like beyond work.
- Your social circle is mostly work-based, and you haven’t built strong relationships outside the office.
- You haven’t thought much about how you’ll structure your days post-retirement.
- You haven’t considered how you’ll achieve a sense of purpose beyond work.
Steps to Improve:
- Start tracking expenses and estimating retirement costs.
- Increase retirement contributions (401(k), IRA, etc.).
- Begin exploring hobbies or volunteer opportunities that interest you.
- Strengthen relationships outside of work (join clubs, reconnect with family/friends).
- Think about what gives you a sense of fulfillment beyond your career.
Level 2: Intermediate Retirement Readiness (On the Right Track)
I don’t have statistics, but if I had to guess I’d say the majority of folks reading this blog fall into Level II. They’ve done some planning, but haven’t taken all the steps necessary to achieve Level 3. If you’ve achieved Level 2, you’re going to be fine. However, to become one of the 15% of retirees who skip the dreaded Phase II in retirement, you’ve got a bit more work to do to achieve Level 3.
Financial Traits:
- You have a structured savings and investment strategy.
- A financial plan exists, but some areas still need refinement.
- You have considered healthcare costs but haven’t fully planned for long-term care.
- You are exploring different retirement lifestyles (downsizing, part-time work, travel).
- Debt is under control, but not completely eliminated.
Non-Financial Traits:
- You have started to shift your identity beyond your career but may still feel uncertain about what comes next.
- You’re aware of the need to build new friendships and deepen family connections but have more to do.
- You are experimenting with different activities (hobbies, part-time work, volunteering) but haven’t fully committed to a new structure.
- You are beginning to redefine what achievement looks like in retirement—moving from work-related goals to personal growth and fulfillment.
Steps to Improve:
- Fine-tune your investment portfolio to create a retirement paycheck.
- Develop a Retirement Drawdown Strategy.
- Plan for healthcare and long-term care beyond Medicare.
- Test your retirement budget by living on your projected income.
- Explore part-time work, mentoring, or volunteering to maintain a sense of purpose.
- Develop a structured daily routine to prevent boredom and maintain productivity.
Level 3: Advanced Retirement Readiness (Fully Prepared & Optimized)
If you’re goal-oriented, I challenge you to achieve Level 3 on the Retirement Readiness scale before you retire. At this level, you’ll be fully prepared and will have a much easier transition into retirement. As I mentioned in Shining The Light on Retirement Blindspots, only 19% of retirees “strongly agree” that the transition was smooth. I suspect those 19% had achieved Level 3 on the Retirement Readiness scale.
Review the traits below, identify your gaps, and work on filling them now. When you cross “The Starting Line,” you’ll be in the best possible position to enjoy your next phase of life.
Financial Traits:
- You’ve completed the 10 Steps To Prepare Your Finances for Retirement.
- You have a well-structured withdrawal plan that minimizes taxes.
- You’ve created a strategy for Roth conversions, if appropriate.
- You’ve created, and funded, your Retirement Paycheck strategy.
- Your investments are diversified and aligned with retirement goals.
- You have a clear strategy for Social Security and Medicare.
- Your estate and legacy planning are complete (wills, trusts, beneficiaries).
- You have planned for long-term care and unexpected expenses.
Non-Financial Traits:
- You have identified at least one new role you’d like to pursue in retirement.
- You’ve accepted the reality that your sense of identity will change.
- You’ve built at least 2 new relationships outside of work that will continue in retirement.
- If married, you’ve discussed how much time you want together (and alone).
- You have considered how much structure you want in retirement and what you’ll do to achieve it.
- You’re starting to engage in non-work activities that bring joy, personal growth, and a sense of purpose.
- You feel a sense of achievement through hobbies, education, community involvement, or family contributions.
Steps to Maintain Readiness:
- Continually review and adjust your plan based on economic and personal changes.
- If you’re a DIY investor, do a retirement readiness review with a financial planner.
- Stay physically and mentally active through exercise, learning, and engagement.
- Schedule a regular “Talk Date” with your spouse to discuss how things are going.
- Reassess estate plans and beneficiaries regularly.
- Keep setting new personal goals to ensure continued fulfillment and purpose.
Conclusion
As I planned for retirement, I recognized that retirement readiness was the key to a successful transition. I invested heavily in retirement planning and am convinced it was the #1 reason my transition was as smooth as it was. Learn from my experience and recognize that your retirement planning must extend beyond the financial elements.
Review the 3 Levels of Retirement Readiness outlined above, and invest your time filling the gaps to achieve Level 3 before your retirement date. Pay special attention to the emotional and social aspects. Think about all of the non-financial benefits you receive from work, and build a plan to replace them as you transition into retirement.
If you’ve already retired, I’m curious what level you were when you retired, and how that impacted your transition. Let’s put some “reader data” to the theory that more preparation results in a smoother transition. Please drop a comment below if your experience could help others.
Retirement can be the best years of your life, but it won’t happen by accident.
Take the time, now, to prepare yourself.
The Starting Line awaits.
Are you ready to cross it?
Your Turn: If you’ve not yet retired, where do you rate yourself on the Retirement Readiness Scale? If you’ve already retired, where were you on the scale when you retired, how did it go, and what lessons can others learn from your experience? Let’s chat in the comments…
