One of the most significant transitions in a person’s later life is exiting a longtime career. For this moment, there is no “one size fits all” decision. A lot depends on someone’s goals (e.g., traveling), and lifestyle decisions (e.g., where to live and whether to continue working), as well as available resources such as savings, a pension, and employer-subsidized health insurance.

Other key factors to consider are health status and family responsibilities (e.g., caring for aging parents or grandchildren).

COVID-19 has added to the complexity of later-life financial planning. It put many travel plans and experience goals on hold and caused some people to reconsider relocating far away from family and friends when it is more difficult to get together.

Other issues that arose during the past year are potential home sellers’ reluctance to sell houses, downsize, and move during the pandemic as well as some people exiting the workforce sooner than planned due to layoffs and health concerns.

All of these factors have prompted many older workers to consider whether they should retire or continue to work longer (assuming they have a choice) to save more money and/or because their planned lifestyle (e.g., traveling and/or moving) is currently not in the cards, anyway, due to COVID-19. Below are nine general planning tips to consider:

Define Your Future Lifestyle

Some people can live happily on half their pre-retirement income while others require 100 percent — or more! For many people, 70 percent to 80 percent is a realistic income replacement percentage. Inflation will increase expenses over time, however, so an inflation rate (e.g., 3 percent) should be factored into retirement savings calculations.

Learn “The 4 Percent Rule”

A frequently cited guideline, based on a 1994 study, is to withdraw 4 percent of your retirement savings annually and adjust it for inflation so that savings lasts about 30 years. Thus, it would take about $300,000 of savings for a $1,000 monthly withdrawal ($300,000 x .04 = $12,000/year). This rule assumes a portfolio with 50 percent stock.

Tweak “The 4 Percent Rule”

More recent research has suggested withdrawing a lower percentage of assets than 4 percent due to prolonged low yields on fixed-income securities. In addition, conservative investors with less than half their money in stocks should probably withdraw less than 4 percent while new retirees in their 70s can probably withdraw more.

Prepare a Retirement Budget

Track current living expenses for several months before you exit the workforce. Next, identify expenses that will end or decrease in retirement (e.g., commuting costs and mortgage payments) and those that are likely to increase (e.g., travel, medical and dental expenses, and health insurance premiums).

Prepare for the Nonfinancial Aspects of Retirement

Consider the three pillars of retirement life: leisure activities, work, and volunteerism. Experts caution against retiring without giving thought to the type of lifestyle desired and activities that will fill the time that a job once occupied. A successful retirement requires much more than money.

Get Help

Check out retirement planning worksheets and online calculators. Monte Carlo analysis is a simulation of possible investment outcomes used to predict the likelihood of sustaining a certain withdrawal rate for, say, 30 years. Consider hiring a certified financial planner on an hourly basis to review your plans and answer your questions.

Try to Pay Off Housing Debt Before Retiring

Entering retirement free of a mortgage and/or home equity loan provides financial “breathing room” by eliminating a household’s largest monthly expense. Various online calculators can help you time your last mortgage payment with your anticipated retirement date.

Consider Downsizing to a Smaller Home

Moving to a smaller, less expensive home provides a number of financial benefits including profit from the sale of a larger, higher-priced home as a source of savings, lower property taxes, lower utility costs, and less home maintenance.

Consider “Geographic Arbitrage”

Moving from a high-cost area to one with lower taxes and living costs is another way to cut expenses. This is a very personal decision, however.

For many people, family and/or community ties trump tax breaks, better weather, and other advantages.

COVID-19 has definitely added a new “lens” to relocation decisions.

There are many other decisions to make and factors to consider in later life. A detailed description of 35 later-life transitions can be found in my book Flipping a Switch: Your Guide to Happiness and Financial Security in Later Life.

The book is organized into three sections for financial, social, and lifestyle transitions with many topics that people don’t often talk about such as determining if certain purchases are “lasts.”

Flipping a Switch is available from Amazon (print and Kindle versions) and in many bookstores.

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