A recently-released book titled How to Retire is a goldmine for those in or near retirement. Christine Benz is the director of personal finance and retirement planning at Morningstar, and for this book, she conducted interviews with 20 experts, covering every corner of retirement planning. The result is a valuable field guide for those approaching this new phase. Below are some of the insights I found particularly useful.

1. Social connections: When we think about retirement planning, most of us think first about the numbers. “Do I have enough? Am I on track?” These are certainly important questions, but as one of the book’s experts, Michael Finke, points out, they’re just part of the equation. Finke argues that it’s equally important to be investing in social connections during our working years. That’s because isolation—unfortunately—can be a reality for some retirees after leaving the built-in social network of the workplace. Where retirees choose to live is also critical. Finke cites research which has found that folks tend to be happier living in their own homes—but only for a time. “Once they hit their 80s,” he says, “people who live in apartments are actually happier.” Everyone is different, of course. The key lesson, though, is that retirement planning requires more than just making the numbers work. We also need to plan how, and where, we’ll spend our time.
2. Retirement styles: I recall once meeting with a couple who were on the doorstep of retirement. When it came to the question of investment strategy, the husband was quick to respond: “Let’s go with 100% stocks.” They could afford the risk, he argued. His wife countered that they should go with 100% bonds, reasoning that they didn’t need to take any risk. While they were able to find a middle ground, this highlighted a reality of retirement planning, which is that there is more than one right way to build a plan, and people are different. Some like managing their own portfolios and are comfortable with market risk. Others, meanwhile, would prefer the guaranteed income offered by an annuity and don’t mind the limitations they impose. To help retirees better understand their personal preferences, researcher Wade Pfau has developed an assessment he calls Retirement Income Style Awareness. The idea is to help couples like the one I described understand both the range of options, as well as their own preferences, before they set out to make a plan.
3. Safe withdrawals: You’ve most likely heard of the “4% rule.” Based on research by advisor William Bengen, this is a guideline for setting a sustainable withdrawal rate from a portfolio. It’s intended to minimize the chance a retiree would run out of money. But researcher Jonathan Guyton notes that the 4% “rule” was never intended as a rule. Because it was designed to be a “set it and forget it” strategy, it is overly conservative, he says. “It’s designed to work even if you get a worst-case scenario” in the market. But since worst-case scenarios occur only in a minority of time periods, most retirees should be able to spend more than 4%. That’s why Guyton recommends an alternative to the static 4% approach. His “guardrails” strategy allows retirees to adjust their spending from year to year as the market rises (or falls). The bottom line: The 4% rule can be useful for a back-of-the-envelope reading on retirement readiness, but it’s not a complete answer.
4. Believing the numbers: Author Morgan Housel has observed that compound interest—a powerful force in finance—doesn’t lend itself to easy computation. If you have to calculate, “eight plus eight plus eight plus eight,” Housel says, the math isn’t difficult. But if we had to compute “eight times eight times eight times eight,” he says, “your head’s going to explode.” The math, in other words, isn’t intuitive. This has always presented a challenge in financial planning, but author JL Collins provides a further insight. Compounding “is like a hockey stick,” he says. “It goes along slowly and then spikes.” That’s a good thing, of course, but it does present a pitfall. Collins describes a discussion with a woman who, like many people in recent years, had benefited from the hockey stick-like growth of the market. She had a problem, though: Even though she could see the numbers, “she couldn’t quite believe them.” It’s an interesting dynamic and fairly common. After decades of saving, plus strong market gains, many people have a hard time shifting gears from saving to spending. That’s why I recommend sketching out long-term projections that include various stress tests. That can help bridge the mindset gap into retirement.
5. When to stop playing the game: William Bernstein, who authored The Four Pillars of Investing, coined this well-known personal finance motto: “If you’ve won the game, quit playing.” If you’ve achieved financial independence, in other words, don’t unnecessarily jeopardize it. Instead, invest conservatively. But Bernstein explains that this advice was intended only for “the median retiree.” Someone with more substantial savings can certainly take more risk. Folks with modest 2% or 3% withdrawal rates, he says, “are not drawing down enough of their assets to get into trouble.” It’s an important point. As a retiree’s asset base grows, the range of suitable asset allocation choices broadens. The advice to “quit playing” is important—but only in some cases.
6. Understanding history: A theme that runs through many of the interviews in this book is the importance of studying history. William Bernstein, for example, explains why stocks tend to be a good hedge against inflation. He cites the Weimar Republic during the interwar era in Germany. “When prices increased there by a factor of one trillion, you actually were able to earn a positive real return.” Elsewhere, Bernstein notes a little-discussed risk in owning an annuity: the risk that the insurer might fail. “I don’t think anyone should soft-pedal that,” he says, citing the 1991 failure of Executive Life Insurance as an example. It left policyholders with more than $4 billion in losses.
7. Setting an allocation: You may be familiar with the “bucket” approach to asset allocation. With this strategy, the size of a retiree’s bond portfolio is set in proportion to their withdrawal needs. Suppose a couple requires $100,000 per year from their portfolio. They might set aside $500,000 or $700,000 in bonds—enough to weather a five- or seven-year downturn in stocks. The remainder of the portfolio could then be invested in stocks, and the result would be a simple stock-and-bond portfolio. But as Christine Benz points out, we shouldn’t overlook the value of cash. She recommends a separate cash bucket, with one or two years worth of expenses. Why hold cash, especially with rates falling? Benz points to 2022, when both stocks and bonds declined. “A retiree with cash on hand could have used those funds to provide spending money.” Holding cash, in other words, might feel inefficient, but it can serve an important role.