Planning to Retire: How to Ease Retirement Worry

In today’s article, I’m sharing with you one of my favorite ways to “try-out” retirement and help ease your retirement worry about the unknowns lurking.

Retirement challenges people in two ways. The obvious challenge is financial; the less obvious challenge is mental. Both tests may be met with sufficient foresight and dedication to ease retirement worry, and provide insight on how retirement looks for you.

Imagine if you could preview your retirement in advance.

In a sense, you can. Financially and mentally, you can “rehearse” for the third act of your life, while still enjoying the second.

Pretend you are retired for a month or two.

Take two steps to act out your rehearsal – one having to do with your budget, the other with your expectations.

Draw up a retirement budget & live on it for one, two, or three months.

Make a list of essential expenses (groceries, gas, utilities, mortgage, medicines), and then a list of discretionary expenses (such as movie tickets, dinners out, spa treatments). This may reveal that you can live handily on less than what you currently spend each month.

Next, list your income sources for retirement.

They might include Social Security benefits (depending on when you want to claim them), retirement plans, pension checks, dividends, freelance or consulting payments, or other revenue streams. 

Investment income is also in the mix here and our office is always here to help you to determine a withdrawal rate from those accounts that you can safely maintain through your retirement. (It might differ slightly from the long-recommended 4%.)

When you have your list, stack the projected total income up against your essential expenses and see how much you have left over.

Try living off of that level of monthly income for a month or more while you are still working. If it covers your necessary monthly expenses and not much else, then some adjustments in your retirement strategy might be needed – a housing change, a change in your retirement date.

If you’re thinking of making any changes or need help navigating your own personal situation, please be sure to contact our office before making any changes. We can help you look at all angles of your circumstances and create a strategy that’s aligned with your financial goals.

See how it feels to retire, and ease your retirement worry.

Before you conclude your career, try to arrange some “previews” of your retirement lifestyle. If you want to serve your community, volunteer avidly for a month or two to get a taste of what daily volunteer work is like.

If you see yourself traveling enthusiastically at the start of retirement, take a dream vacation or even a couple of consecutive trips (if your schedule allows) to see how they truly fit into your financial picture.

Your “rehearsal” need not be last-minute.

If you think you will retire at 65, you could try doing this at 63, 60, or even before then.

The earlier your attempt, the more time you have to alter your retirement strategy if needed.

Related: The Top Questions to Consider Before You Retire

What else should you consider as you rehearse?

Besides income, expenses, and the day-to-day retirement experience, there are a few other factors to gauge.

How much cash do you have on hand? Starting retirement with a strong cash position provides you with some insulation if you happen to retire during a market downturn. The possibility of a bear market coinciding with your entry into retirement may make you want to revisit your portfolio allocations as well.

Related: Market Cycles and Retirement: Sequence of Return Risk in Portfolios

Take a second look at your projected monthly income.

Will it be consistent? If it varies, you will want to address that.

If you are in line for a pension, you will face a major, likely irrevocable, financial decision: should it be single life, or joint-and-survivor? The latter option may reduce your pension income in retirement, but give your spouse 50% or more of your pension payments after you die. 

Your employer might also offer you a lump-sum pension buyout; if that turns out to be the case, give our office a call and we can help you to decide if the lump sum constitutes the better deal versus a lifelong income stream.1

How about your entry into Medicare?

You may enroll in it at medicare.gov within a window of your 65th birthday (that is, beginning three months prior to your birthday month and ending three months after it). 

If you sign up before your birthday, you will be covered beginning on the first day of your birthday month. Sign up following your 65th birthday, and you may have to wait for coverage to begin.2

If you expect to stay on the job after 65, consider signing up for Medicare Part A (the part that pays for hospital care) within the usual window. It will not cost you anything to do so, and sometimes Part A makes up for shortcomings in employer-sponsored health plans. You can enroll in Part B and other Medicare component parts later – within eight months of your retirement, to be precise. 

You will want to pay attention to that 8-month deadline, as your premiums will jump 10% for every 12-month period afterward that you refrain from enrolling. If you pay for your own insurance, you will still need to enroll in Medicare when you are eligible (Medicare will make that coverage superfluous, so you can anticipate dropping it).3

Rehearsing for retirement can be very insightful

Some new retirees leave work abruptly only to have their financial and lifestyle assumptions jarred, leading to so much unneeded retirement worry. 

As you want to make a smooth retirement transition to a future that corresponds to your expectations, test-driving your retirement before it begins is only wise.

If you need help sorting out what options would work for you and your family, please reach out to our office. We’re here to help you navigate what best suits your goals and personal circumstances and will help you find the best solution for you.

1 – TheBalance.com, December 13, 2021
2 – Medicare.gov, 2022
3 – CMS.gov, 2022