Think You’re Ready for Retirement? Do a Trial Run First

Sheiresa Ngo, Contributor, The Cheat Sheet
February 16, 2018

You can never be too prepared when it comes to retirement. You might think you're ready to kick up your heels and enjoy the retired life, but you could be wrong. One way to make sure you're really ready is to do a retirement trial run. It's one of the best reality checks for your retirement plan. This involves living the lifestyle you imagine you would want to live when it's time to leave the workforce for good.

A retirement trial run will help you see whether your plan is feasible. If not, the beauty of the trial run is you can find out what you need to adjust before you've hung up your work hat. By the time you retire, it's harder to make adjustments if you realize you don't have enough money to sustain you.

Someone who decided to try a retirement test run is John Udo, founder of the personal finance blog Retire by 40. Udo retired at age 38. Part of his success was due to his plan to cut back on spending, save all of his earned income and live on one household income (his wife's).

"It let us test if we could really live without my paycheck," Udo said on his blog. "I'm happy to report that this has worked out very well. The test run prepared us for the lower household income, and we kept our expenses moderate since then."

Do you think you're ready to retire? Have you considered everything that might affect your post-work journey? Even if you're positive you're retirement ready, try a test run first to be sure. Here are five elements that should be part of your retirement trial run.

Test your retirement budget

Your retirement budget might look great on paper, but will it work out when you try to live on it? Make sure your retirement budget is realistic. And don't forget to account for easily forgotten costs, such as health care and transportation. Take roughly three to six months, and live on the budget you have set for yourself after you retire. Can you comfortably afford all your expenses on this new budget, or do you find yourself running short on cash at the end of the month?

Why this is important

If you find you can't comfortably live on your trial retirement budget, this is an indication you might not be saving enough, or you've set an unrealistic budget or timeline for retirement. It's not a great sign if your calculations show you'd have to withdraw more than the savings percentage you've set. Most pre-retirees estimate they will withdraw no more than 3 or 4 percent of their savings, depending on timeline, asset allocation and confidence level.

Take time to re-evaluate your retirement savings goals. Your best bet is to meet with a certified financial planner, who can go over your budget and help you make the appropriate adjustments. You might find you'll need to spend a few more years in the workforce or take on a part-time job during retirement.

Try out your desired retirement city

It's not the best idea to decide on a retirement city solely based on a list you read or on the opinions of your friends and family. For example, maybe all your friends are planning to retire in Florida, so you've decided you want to retire there, too. However, your best bet is to live there for a couple of months to see whether you really like it. Try staying with a friend or even doing a home swap.

Why this is important

Deciding to move to a particular city is a very personal decision. What works for one person might not work out for you. Your friends and family might say the weather is perfect, but after staying there, you might decide what they consider warm is downright hot for you. Or you might discover there's not much to do, or your seasonal allergies are much worse than you thought they would be. Live there first, and then decide whether it's for you.

Test your retirement job

If you don't desire to leave the workforce completely, you might be contemplating a "second act" career (also known as an encore career). This is when retirees decide to leave one career and work in a completely different industry. Roughly 47 percent of retirees say they have worked or plan to work during retirement. 

However, the only way to know whether an encore career is really for you is to try it out for a couple of months. You can ask friends and family, as well as those in your professional network whether they know of anyone who might let you shadow him or her for a few months. If you have the time, you might also want to consider applying for summer internships.

Why this is important

It's a good idea to test a job before you commit to something you later find out makes you miserable. In addition, some second-act careers require quite a bit of money to get into, so you'll need to do your research and take that into account before jumping in. For example, some new careers will require you to obtain an additional degree or to pay for certification courses. Will there be enough room in your retirement budget to accommodate going back to school?

Test drive your retirement activities

What will your social life be like? You might think all you want to do is watch television, read and spend time with your cat, but are you absolutely positive? The work stress you're experiencing now might make you think just sitting at home and relaxing is the ultimate retirement lifestyle. But once you test it out, you might change your mind. Don't base all your future decisions on current circumstances.

Why this is important

Once you've had a taste of your desired retirement lifestyle, you might decide to make some changes. The way you think you want to live might be too boring, fast-paced or expensive. You might decide spending time with your cat isn't what you wanted after all. Instead, you want to spend time with friends and family, join a senior center or travel the world. It might not seem like it now, but a rich social life is important during retirement. A study conducted by the Institute for Economic Affairs found retirement can increase clinical depression risk by 40 percent.

Re-evaluate your retirement wish list

The trial-run period is not only about testing your retirement plan, but also thinking through some of your retirement goals and wishes. Perhaps you and your partner hope to retire at the same time. If this is the case, it would work best if both of you did the trial run together. Or maybe your secret wish is to live the single life and get a divorce when you retire. If that's your desire, take this into account when you devise your retirement budget because you'll have to adjust to not having your spouse's income.

Why this is important

Taking the time to carefully go over your retirement wish list will give you an opportunity to see whether some things are better left as wishes. For example, you might find a "gray divorce" isn't in your best interest. One reason is your spouse might be entitled to some of your retirement savings. Can you afford to give up a portion of your nest egg without significantly impacting your desired lifestyle?


This article was written by Sheiresa Ngo from The Cheat Sheet and was legally licensed through the NewsCred publisher network. 

The information in this article does not necessarily represent the views of First Republic Bank.