Many people expect retirement to be a time of absolute leisure — but entering this chapter with no real planning in terms of lifestyle could be detrimental, even dangerous.
Retirement Tip of the Week: Whether you’re planning to retire at 65 and you’re in your 50s and 60s, or you’re thinking of “early retirement” in your 40s, test out your dream lifestyle before actually running with it.
Not everyone can actually pretend to retire for a month or two while they still need to work and earn a living, but it may be worth some of your vacation time to try it out. This is beneficial for everyone, at any age — whether you’re just a few years out from a traditional retirement age, such as 65, or in your 30s and considering an “early retirement.”
This type of planning is also very different from financial planning. Having the money to fund retirement is critical to having a comfortable old age — without an appropriate amount of savings, or understanding the sources of retirement income like a pension or Social Security, a person could end up running out of money, and find themselves in or near poverty (a real risk to the elderly).
Lifestyle planning is everything that retirement savings will fund, including: housing, hobbies, travel, gifts to loved ones and charity, the community, arts and so on. It also impacts the other crucial aspects of financial planning. For example, where you live will affect the taxes you pay for real estate or even Social Security. How much you need to spend on a lifelong goal of traveling around the world on a cruise will affect how much you need to save separately so this dream doesn’t negatively affect the funds you’ll need to pay for health care and utilities in the future.
Planning on doing nothing in retirement? Think again. This might work for a short amount of time, but eventually many retirees find they need a sense of purpose. There are six types of retirees, according to author Nancy Schlossberg: the adventurer, who wants to venture into the unknown; the continuer, who keeps up with their former career in some capacity; the involved spectator, who pursues something similar to a former career but from a very part-time role; the searcher, who is looking for something to do; the retreater, who may be a “couch potato” unsure of what to do; and an easy glider, who has no agenda.
At one point or another, everyone is a searcher — sometimes at the very beginning of retirement, in other instances after trying out a new hobby or a volunteer gig. Some people may find they’re taking the “easy glider” approach, such as if the retiree came from a physically demanding job, Schlossberg said — but this path could also be a short-term fix.
Finding purpose in retirement can be challenging, but the alternative could be depression and boredom, said Barbara O’Neill, chief executive officer and founder of Money Talk, a financial education and consulting business and author of “Flipping the Switch: Your Guide to Happiness and Financial Security in Later Life.”
There are two other instances when someone should attempt to mimic their retirements — when they’re planning to live abroad, and when they’re thinking of pursuing “financial independence, retire early” (also known as FIRE).
Testing out life abroad should be done during the off-season of a dream destination. If possible, the longer the test, the better. Also think about the less-attractive aspects of this potential new home, such as where the local hospitals and doctors are, if it’s prone to natural disasters such as hurricanes or earthquakes and how to receive any Social Security benefits if in a foreign country.
For the FIRE folks, keep in mind that retirement will last a slew of decades. In that time, early retirees may decide they want to go back to work, so keep skills up to date. They should also have a plan for health care, since they won’t be eligible for Medicare until age 65. Financial independence and an early retirement may be rewarding at first, but it comes with its own host of obstacles, wrote Chris Mamula, who retired from physical therapy at 41 years old and moved across the country with his wife to pursue their dream lifestyle.
“Just recognize that financial independence and early retirement are not some magic bullet that will fix your life,” he wrote.
Want more actionable tips for your retirement savings journey? Read MarketWatch’s “Retirement Hacks” column