The 5 Keys to Making Your First Year of Retirement Your Best Year Yet

This is it!

The year you've spent decades working for, saving for, investing for, and planning for.

Many people enter their first year of retirement focused on preventing things that could go wrong. But with a little forethought and a positive attitude, a lot can go right this year as well.

Here are five keys to thriving financially, physically, and emotionally during your first year of retirement.

1. Design Your Ideal Week (Before You Need It)

"Every day is a Saturday in retirement!" might sound like a great alternative to working every day.

But not every Saturday is a day on the golf course or a vacation to the beach.

A lot of Saturdays are … just kind of boring.

And if you start to string together too many of those lazy days as a retiree, you'll get bored too.

Here's a simple exercise I recommend in my book, Keen on Retirement: Engineering the Second Half of Your Life:

Buy a blank calendar or divide a sheet of paper into 7 columns (days of the week) with three rows each (Morning, Afternoon, Evening).

Now ... fill in the blanks!

Some seniors have no trouble creating a new week for themselves, full of coffee with friends, sports and exercise, hobbies, volunteer work, and date nights with their spouses. They might even leave a few blank spaces to try new activities.

Others see all that blank space and wonder what they're going to do with themselves for the next 30 years.

That's why the sooner you try this exercise ahead of retirement, the better. Give yourself some time to think intentionally about what your ideal week could look like.

And once you do retire, give yourself permission to be adventurous, make a few mistakes, and switch things up if your first draft isn't as fulfilling as it could be.

2. Nail Your Spending Sweet Spot Early

Some retirees are so nervous about spending down their nest eggs that they never really enjoy their money.

Others are so excited to tackle their bucket lists and enjoy their freedom from work that they treat their nest eggs like a jackpot and spend too much too soon.  

The most successful retirees find a sweet spot somewhere in the middle that balances short-term and long-term goals.

To find yours, be rigorous about budgeting and tracking your spending for the first three to six months of retirement. This exercise shouldn't make you feel bad about how you're using your money; it's just to gather data.

Around the midpoint of your first year, take a look at your spending. Set aside necessities, like utilities, mortgage payments, and Medicare premiums. As you review the remaining items, ask yourself:

• Am I living within my means?

• Is this spending intentional (dream vacation) or habitual (an extra streaming subscription I should cancel)?

• Where am I spending less than I used to while I was working? Where am I spending more?

• Am I spending on things that make me happy and that are making retirement more fulfilling?

• Should I consider part-time work to meet my spending goals and fill a few more hours in my weekly schedule?

Your spending data and your answers to these questions will help you refine your monthly budget and clarify how and why you're spending the way you are.

3. Master Your Tax Strategy While You Still Have Control

For many, the years between retirement and the start of required minimum distributions (RMDs) at age 73 are a golden window for optimizing lifetime tax liability.

Your first year of retirement is often your lowest income year in decades, especially if you can afford to delay taking Social Security. This creates an opportunity for several strategic moves, including:

• Roth Conversions: Moving money from tax-deferred accounts to tax-free accounts while you are in a lower tax bracket.

• Tax-Gain Harvesting: Selling securities that have appreciated to reset your cost basis without triggering high capital gains.

• Qualified Charitable Distributions (QCDs): If you are 70½ or older you can give to a qualified charity directly from your IRA. Once you do start taking RMDs, these QCDs can help you meet your annual requirements without increasing your taxable income.

• Strategic Deductions: Time large medical expenses or charitable gifts while potential tax liability is low.

Many of these strategies – or the failure to implement them – could affect your tax liability for the rest of your retirement. That's why, at Keen Wealth, tax planning is part of our comprehensive process throughout the year, not something we just review every spring.

4. Invest in Your Health Like It's Your Most Important Asset

Your portfolio can't fund a retirement that you aren’t healthy enough to enjoy.

When you were working and raising a family, diet and exercise may have been an afterthought. But as you begin your first year of retirement, it's time for a health audit.

Start with your free Welcome to Medicare visit, which includes a checkup and preventative screenings that will help you and your doctor establish some baselines.

Then, focus on building up healthy, sustainable habits, including:

• Regular check-ups with doctors, dentists, and specialists.

• Annual review of your Medicare coverage during fall Open Enrollment.

• 150 minutes of aerobic exercise every week, supplemented with age-appropriate strength training to help maintain mobility and bone density.

• 7-9 hours of sleep every night, and an evening routine that helps you power down before your head hits your pillow.

• Planning healthy meals and shopping weekly.

The more you prioritize your health while you're still well, the less you're likely to spend on healthcare later in retirement, when most seniors’ needs begin to rise.

Just as importantly, your wellness can also be an engine that drives you through some memorable retirement experiences, from a weekly round of golf with your best friends to hiking through our National Parks with your spouse to chasing your grandchildren around the backyard.

5. Communicate Openly with Your Spouse

After decades of work and dividing household tasks, many spouses just aren't used to spending the majority of their days together. During the first year of retirement, tensions can rise as routines get interrupted and toes get stepped on.

Some couples also suddenly realize that they spent far more time prepping for the money side of retirement than they did for the experience of retirement. One spouse might be looking forward to all those "endless Saturdays." The other might be expecting a full calendar of travel.

One item that couples can put on their new retirement calendars is a monthly or quarterly "Financial Marriage Meeting" to discuss:

• Budget and spending patterns

• Investment performance and strategy

• Upcoming expenses and priorities

• Goals and dreams for the year ahead

At Keen Wealth, we often facilitate these kinds of discussions for newly retired couples. Having a neutral third party at the table can keep the conversation trending in a positive direction and align spouses on plans that will make retirement more rewarding – both when they're together and when they're pursuing separate interests.

Enjoy the Journey

I often tell folks that financial planning is never a “one-and-done” process. Retirement is no different. Very few seniors settle into a “perfect” retirement right away.

So go easy on yourself, especially in the first year. Be open to new experiences. Follow your curiosity. Pivot away from unpleasantness. Invest more of your resources in happiness.

Schedule a visit to Keen Wealth and let’s discuss how we can help make your first year of retirement your best year yet.

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About Bill

Bill Keen is a financial advisor with over 30 years of industry experience. As the founder and CEO of Keen Wealth Advisors, a registered investment advisory firm, he focuses on providing personalized retirement planning designed to help people thrive before and during their retirement years. With a passion for educating others, Bill regularly blogs about retirement planning, hosts the podcast Keen on Retirement, and has contributed to Forbes, U.S. News and World Report, Reuters, Wall Street Journal’s Market Watch, Yahoo Finance, and other publications. Based in Overland Park, Kansas, Bill and his team work with clients throughout the greater Kansas City area and across the nation. To learn more, connect with him on LinkedIn or visit www.keenwealthadvisors.com.

KWMG, LLC’s dba Keen Wealth Advisors (“company”) is an SEC Registered Investment Advisor located in Overland Park, KS. The company and its representatives may only conduct business in those states where registered or where excluded/exempt or from licensure. For registration information, please contact the SEC or the state securities regulators for the states where the company is notice filed. A copy of the company ADV is available upon request. Advisory services are only offered to clients or prospective clients where the company and its representatives are properly licensed or exempt from licensure. No advice may be rendered by the company unless a client service agreement is in place. This information is not intended to be investment advice or construed as a recommendation or endorsement of any particular investment or investment strategy and is for illustrative purposes only. Clients and prospective clients must consider all relevant risk factors involved with each strategy, including costs or fees, and their own personal financial situations before trading.

The views outlined in the book, Keen on Retirement Engineering the Second Half of Your Life, are those of the author and should not be construed as individualized or personalized investment advice. Any economic and/or performance information cited is historical and not indicative of future results. Economic forecasts set forth may not develop as predicted.

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