Difficulty
Step 1: Do a Full Review of Your Financial Situation
The first and most important step is to stop and face the reality. Not roughly, not from memory, but diligently.
This is what you should be aware of:
- All sources of income: your state pension, your occupational/supplementary pension as the actual net amount you receive, as well as any other income sources, such as passive income from dividends or rental income.
- Savings and investments: cash and investment accounts, term deposits, PEPP and other third pillar products.
- Fixed and variable expenses: both the apparent ones and those that appear less frequently, irregularly, or seasonally.
- Liabilities: such as a mortgage or loans if you still have any.
This is the moment when many people see their full financial picture for the first time. And it often turns out that the problem is not a lack of money, but a lack of clarity.
It is equally important to look at your safety cushion:
- How much money you have in an easily accessible emergency fund?
- How many months of living expenses would the cushion cover?
- What would happen if your expenses suddenly rose or income fell?
This step does not solve problems yet, but without taking it first, every next step is just a shot into the dark.
Step 2: Plan Your Retirement Not Just for Today, but for Your Whole Life
The second step is moving from the present moment to a long-term perspective. Unlike the typical way of thinking about monthly budgets or annual plans, a retirement plan must also include a horizon of more than a dozen or even several dozen years, because that is what determines real financial security later in life.
Retirement rarely lasts just a few years: more and more often, it means 15–25 years of life during which a lot will change. Planning for retirement therefore means answering a few key questions:
- How much money do I realistically need today?
- What may my expenses look like in 10 or 20 years?
- Which funds are to be used now and which have a long-term purpose.
This is where one of the most common mistakes appears: treating all savings the same way. Some money will be needed in the next few years, but some may still have 15 - 25 years ahead of it. That money should not sit idle, because inflation will steadily reduce its value.
At this stage, it is also worth avoiding one of the most common retirement mistakes - withdrawing all your pension funds’ savings in one lump sum. Additional pension schemes were designed as a supplement to state pension, not as a one-time cash injection.
Withdrawing this money in installments lets you preserve tax advantages, keep some of the funds invested, and create an additional regular source of income. In practice, it works like a second, private pension; much more stable than a one-time decision made at the start.
A retirement plan should also consider unpleasant scenarios:
- Deteriorating health.
- Rising care costs.
- Changes in family circumstances.
A good plan is not about predicting the future, but about being prepared so that you won’t crumble at the first change in circumstances.
It is also important to remember that a retirement plan is not a document “for life.” It is more of a reference point that is worth revisiting regularly. Health, family circumstances, expenses, and market conditions change over time, so a good habit is to update the plan at least once a year. That way, adjustments remain small and calm instead of forced and stressful.
Step 3: Manage Your Money Consciously - Calmly and Simply
The final step is everyday practice. Even the best plan will not work if money is managed poorly.
In retirement, three principles matter most:
- Simplicity.
- Predictability.
- Protecting the real value of your capital.
Some of your funds should remain safe and liquid, for daily living and unexpected expenses. But some of your money, especially funds with a long-term purpose, should be invested, because that is the only real way to fight inflation.
A wise approach is to divide your money into different imaginary pockets according to when it will be needed.
- The first pocket is money for current living expenses: Spending over the next year, which should remain safe and easily accessible.
- The second pocket is money with a horizon of several years, for example three to five years: Here, balanced or conservative forms of investing work well, limiting fluctuations while still partially protecting capital against inflation.
- The third part is funds with the longest horizon, often 15–25 years. This money can be invested with a more long-term approach, with a greater share in equities, not in order to take unnecessary risks, but to give the capital a chance for real growth over time.
For many people, complicated strategies are unnecessary. Opting for passive investing i.e. broadly diversifying across stocks and bonds at low costs and with automated decision-making, is usually the best choice. More and more often, this role is fulfilled by ETFs, including those managed by robo-advisors, which reduces stress and the need for constant decision-making.
An important part of managing money is also the habit of a regular review. In retirement, it is worth revisiting your plan once a year, checking what has changed, and adjusting instead of only reacting when a problem appears.
Also keep these few pieces of advice in mind:
- Do not keep all your savings in one bank or one product.
- Keep a simple documentation: A list of accounts, investments, and passwords accessible to a trusted person.
- Be careful with “investment opportunities” targeted at retirees: Time pressure is a warning sign.
- Do not assume that expenses always fall in retirement, in a lot of cases the only change is in their structure.
- Separate money for living from money that is invested.
- Leave yourself some room for enjoyment: An overly restrictive plan is hard to maintain.
- If you are not sure, consult with an independent advisor: Once, without long-term contracts.
To Sum It up
Retirement does not require perfection. It requires awareness, a plan, and a few good habits. Three steps: Review, planning, and calm management are enough to turn uncertainty into control.
And in retirement, that can be the most valuable asset of all.
Secure a comfortable future and take advantage of the European pension benefits
