Test Driving Retirement: How to Ease Into Your Golden Years
You know what they say about practice -- it makes perfect.
So it's not surprising that, in an era that offers so many ways to screw up your golden years, "practicing retirement" is becoming a more common strategy.
"Many people haven't saved enough to retire, so they are anxious because they realize they will have to keep working in their 60s when they had hoped that they would be having fun," explains Christine Fahlund, a senior financial planner with T. Rowe Price. Don't panic, she says: Instead, practice.
Simply put, practicing retirement is a way to dip your toe in the retirement waters and see if they're too hot, too cold, too "just not you yet," or just right. Are you really ready financially -- and emotionally? Where are the gaps in your plan?
"The best thing about practicing retirement, it's not the Super Bowl. If you drop the ball, you pick it up and try again," says Fahlund. The goal is to figure it out in your 60s, so you're set when you fully retire by 70.
Giving Yourself More Time to Prepare
So what does a retirement tryout look like? Much of that answer will depend on your needs and goals. However, first, it's likely you'll need to come to grips with the notion of delayed -- but not denied -- retirement.
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Generally, assume that you are going to keep working through your 60s -- though perhaps part-time. If you do have to keep up the full 9-to-5 routine, then take comfort from the fact that, in practice retirement, "your attitude about work will be different if you're also doing fun things," says Fahlund. Because full retirement is delayed, she explains, you can take your foot off the savings gas pedal a little bit, and use that money to explore some of the things you have in mind for later.
"Maybe you envision spending your days sailing -- buy the boat now while you're working," says Fahlund. "You want to pay off big ticket items before retirement. Take some trips and see if it's indeed what you want to do." You'll have more discretionary income during these transition years to start seriously pursuing your retirement aspirations well before you might have expected, she adds.
Working longer is the real key to the practice retirement formula. Those extra years of salary -- even if only part-time -- are critical. And working longer pays off emotionally as well: "You stay sharp, lively," she adds.
The Benefits of Delayed Gratification
The hallmark of practice retirement is balance: between working and playing, spending and saving. Beyond that, there are a few tenets at the heart of the strategy:
Keep working, full or part-time;
Don't touch your nest egg;
Delay taking Social Security benefits;
Keep invested in a diverse portfolio (you can stop contributing to your retirement plan, though you may want to continue to do so, at least up to the amount that qualifies you for the employer's match).
It's not hard to see the sense in this. By continuing to work and postponing the day you start receiving Social Security benefits, you position yourself for higher payments for the rest of your life, points out Fahlund. Every year you wait to take Social Security benefits, they increase about 8% (in today's dollars) -- almost doubling in purchasing power by age 70. And because the increases are based on government formulas and not investment returns, they are not impacted by market conditions. For a better idea of how practice retirement scenarios can play out, check out this chart and other information from T. Rowe Price..
On the Road Again ... And Again
Doreen Orion and her husband literally did a test drive of retirement. "My husband came home one day and out of the blue announced he wanted to 'chuck it all' and travel the country in a converted bus for a year. Neither of us had ever stepped foot in one, or in an RV." They are both physicians, specializing in psychiatry. "I demanded to know, 'Why can't you be like a normal husband in a midlife crisis and have an affair or buy a Corvette?' " recalled Orion.
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She told him she'd never do it, but she relented, and she's glad she did. They traveled from the summer of 2004 to the summer of 2005. She worked part-time during that year, doing insurance review work -- all she needed was Internet access and a telephone. Since then, they've spent a couple of winters away on the bus. Every time they came home to Boulder, Colo., "we were seriously bummed," says Orion, who like her husband is in her early 50s.
They tasted retirement, loved it, and have put their house on the market, so they won't have the expense of a mortgage.
"It's far cheaper to live in an RV," says Orion. "There is a huge shortage in our specialty all over the country. We can each just go somewhere for a month or so, work in a hospital or clinic and leave. I don't know how long we'll plan to be on the road. I have no idea where we'll go, but we'll stay in a place for a few weeks. If we like it, we stay longer. If we don't, we just pull up stakes."
At this point, the couple has no target date for full retirement. Once their house is sold, they will work very little, perhaps 10 hours a week each while on the road -- just enough to meet their minimal expenses and to avoid having to tap the proceeds from the sale of the house.
"One of the things we loved most about life on the road was, unlike our regular lives, nothing had to be planned," she said. "We had so many wonderful adventures, but even the misadventures -- fire, flood, armed robbery and finding ourselves in a nudist RV park, just to name a few -- enriched our lives. We never knew what the next day would bring."
It also taught her new priorities: She put aside her passion for fashion. "I realized I no longer wanted to support a lifestyle. I'd much rather support living a stimulating life and getting to spend time with the person I love on a constant adventure. I no longer go to the mall," says Orion. Her new love is writing: She wrote about their adventures in her book, Queen of the Road.
'I Felt My Mind Turning to Gelatin'
Willi Rudowsky, 63, says she didn't know she was "practicing retirement" when she quit her job at Williams-Sonoma (WSM) in San Francisco 11 years ago and moved to St. Petersburg, Fla. "But that's exactly what I did," says Rudowsky, "And, I didn't like it. The yoga, bike-riding and volunteering just didn't work for me. I felt my mind turning to gelatin." Though she loved being able to schedule trips without having to ask her boss for time off, the lack of structure bothered her.
Three years into her "new life" she went back to school, started taking courses, liked it so much that she kept going until she got a master's degree in journalism. She now works part-time, handling customer service issues for Poynter's News University. That leaves plenty of time for Rudowsky and her husband to support local theaters, music venues, museums and serve on their condo board, among other things.
"I'm in no hurry to stop working," she says. "I don't do it for the money; I do it for the intellectual experience. When I fully retire in three years, I will exercise more, travel more, maybe travel to Calcutta. I don't believe I will run out of money before I run out of life. I will gradually replace my job with more of what I am doing outside of work now. I worked out all the kinks in my practice retirement, so I will -- I hope -- just slip into it."
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