10 Smart Steps to Prepare Your Finances for Retirement

Retirement is a major life transition—especially when it comes to money. Shifting from earning and saving to spending what you’ve built requires thoughtful planning and a mindset change. The good news? With the right strategy, you can move forward with confidence and peace of mind. Here are 10 essential steps to help you prepare your finances for the retirement you deserve.

1. Start Building Your Cash Reserve

Before retirement, aim to grow your cash savings to cover 1–3 years of expenses. This buffer protects you from having to sell investments during a market downturn. Start early—redirect bonuses or extra income into a money market account to build this safety net.

2. Estimate Your Retirement Spending

To know if you’re ready to retire, you must understand how much you’ll spend. Track your current expenses, and factor in post-retirement changes like healthcare costs, travel plans, and housing. This number forms the foundation for every other decision.

3. Determine Your Income Sources

Retirement income typically comes from two buckets:

• Guaranteed: Social Security and pensions

• Variable: Investment withdrawals, part-time work

Identify when you’ll take Social Security, estimate pension payouts, and calculate safe withdrawal rates (typically 3–4%) from your investments.

4. Identify and Plan for “The Gap”

If your spending exceeds your guaranteed income, the difference is “the gap.” Plan how you’ll fill it—with investments, side income, or annuities. Be especially mindful of early retirement gaps before Social Security or Medicare begins.

5. Hedge Against Risk

What if the market drops right after you retire? Consider what could go wrong and add conservative estimates into your plan. It’s better to be pleasantly surprised than financially stressed.

6. Assess Your Current Financial Picture

Get a full snapshot of where you stand. Update your net worth, retirement assets, and current income streams. Tools like the Boldin Financial Planner can help you model different scenarios and identify any adjustments you need to make.

7. Create a Reliable Retirement Paycheck

Set up a system to replace your paycheck. One proven method is the Bucket Strategy:

• Bucket 1 (Cash): 2–3 years of spending

• Bucket 2 (Bonds): Mid-term needs

• Bucket 3 (Stocks): Long-term growth

Automate monthly transfers to your checking account and rebalance annually for peace of mind.

Your risk tolerance changes in retirement. Without a paycheck, you'll want to reduce exposure to market swings. A 60/40 stocks-to-bonds split is common, but tailor your mix to your comfort level. Consider bond ladders or annuities if you don’t have a pension.

9. Explore Roth Conversions

Early retirement may offer a window to convert traditional IRAs to Roth IRAs at a lower tax rate. This can lower future Required Minimum Distributions and tax burdens—but requires careful planning, especially around healthcare subsidies and tax payments.

10. Review Your Finances Every Year

Create an annual financial review checklist. Track your net worth, expenses, investment performance, and withdrawal rate. Make it a habit to assess what’s working and what needs adjustment.

Final Thoughts

Preparing for retirement isn’t just about money—it’s about peace of mind. With a thoughtful, step-by-step plan, you can transition into this next phase of life feeling secure and empowered. At Aging Matters, we’re here to support you every step of the way.