Try Retirement Before You Retire

Series 3: Rethinking Retirement

Part 4: Try Retirement Before You Retire

There's an interesting contradiction in the way we approach retirement. We can spend thirty or forty years preparing financially for it, make projections stretching decades into the future and carefully calculate how much income we might need, yet when the day finally arrives, many people are experiencing retirement for the first time.

For such a significant change, we don't get much practice.

I've always found that curious because we rarely approach other major decisions in quite the same way. Before buying a home, we walk through it several times and explore the neighbourhood. Before moving interstate, we might spend time there first. If we're considering a new car, we take it for a drive. Yet when it comes to one of the biggest lifestyle changes we'll ever make, there's often an assumption that we'll somehow know what we want when the time comes.

After years of conversations with people approaching retirement, I've become increasingly interested in a different idea. Rather than trying to imagine retirement entirely from the working side of the fence, perhaps we should find ways to experience parts of it before making the transition.

Not because retirement is something to be worried about, but because the reality can be quite different from the picture we've carried around in our heads for years.

The Retirement In Your Head May Not Be The One You Actually Want

Ask someone what retirement looks like and you'll often hear about travel, grandchildren, golf, gardening, walking on the beach or finally having enough time to do all the things work has pushed aside.

There's nothing wrong with any of those things. In fact, they can make for a wonderful life. What I've noticed, though, is that we're very good at imagining the highlights and not quite as good at imagining the ordinary days in between.

A three-week holiday in Europe tells you very little about what it would be like to live without work for the other forty-nine weeks of the year. Neither does a relaxing long weekend at the coast. Those are breaks from normal life, which is precisely why they feel different.

Retirement eventually becomes normal life.

That's why I think one of the more useful exercises for someone approaching retirement is to stop imagining the perfect retirement and start imagining an ordinary one.

Where would you be on a Wednesday morning?

Who would you see regularly?

Would you and your partner spend most of your time together or have quite separate routines?

How much travel would you genuinely want once it was no longer squeezed into four weeks of annual leave?

Would you still want some involvement in your profession or business?

Even where you live can become part of the conversation. A house that worked beautifully while raising a family and commuting to work may feel very different when you're spending considerably more time there.

These aren't questions with correct answers, and the answers often change once people have the opportunity to experience them rather than simply imagine them. That's precisely why experimenting before retirement can be so valuable.

Use Your Time Off Differently

Most of us have been trained to use annual leave as an escape from work. We book a holiday, go somewhere different and try to make the most of every day because we know we'll soon be back at work.

If you're within a few years of retirement, it might be worth occasionally using some of that time differently.

Instead of going away, spend a week or two living roughly as you imagine you might live in retirement. Stay home. Don't fill every day with projects simply because you finally have time to complete them. Allow the week to develop a normal rhythm and notice what happens.

Do you enjoy the slower pace or become restless by Thursday? Do you naturally seek out other people? Do you find yourself missing professional conversations? Does your partner have a completely different idea of how the day should unfold? Are the hobbies you've been saving for retirement genuinely enjoyable when you have unlimited time for them?

You might discover that the life you've imagined suits you perfectly, which is useful information. You might also discover that you want more activity, more social contact or even more work than you expected, and that's useful information too.

I've always believed good planning becomes easier when assumptions are replaced by experience.

The same principle can apply to travel. If part of your retirement dream involves spending three months overseas each year, perhaps try six weeks before reorganising your entire financial life around that assumption. If you're considering moving to the coast or downsizing to another area, spend meaningful time there outside holiday season and see what an ordinary week feels like.

Sometimes the retirement people thought they wanted becomes even more appealing once they try it. At other times, the experiment changes the plan completely.

Both outcomes are valuable because you've learnt something before the decision became difficult to reverse.

Test The Spending As Well As The Lifestyle

There's another part of this exercise that financial planners tend to find particularly interesting.

Before retirement, most people have a reasonable idea of what they currently spend, but retirement changes spending patterns in ways that aren't always obvious. Commuting and work-related expenses may fall, while travel, entertainment, hobbies and healthcare may increase. Having more time can also create more opportunities to spend money, particularly in the early years when people are healthy and keen to enjoy their freedom.

Rather than relying entirely on estimates, one practical approach is to test the retirement income you've been planning around.

If your financial plan assumes you'll live on a particular annual amount after retirement, you might try living on something close to that amount while you're still working and see how it feels. The difference between your current income and the amount you're testing could potentially be directed towards savings, superannuation or reducing debt, depending on your circumstances and the advice you've received.

The exercise isn't about making life unnecessarily restrictive. It's about discovering whether the lifestyle and the budget you've imagined actually belong together.

People sometimes discover they're perfectly comfortable spending less than they expected because many work-related costs disappear. Others realise the retirement they want will cost more, particularly if travel, helping adult children or maintaining two properties forms part of the plan.

Finding that out two or three years before retirement gives you options. Finding it out two or three years afterwards can require compromises that are much harder to make.

This is where financial planning becomes particularly useful because the numbers can be adjusted while there's still time to respond. You might decide to work a little longer, contribute more while you're earning, modify your expectations or simply discover that you're in a stronger position than you thought.

The objective isn't to predict every dollar you'll spend for the next thirty years. Nobody can do that. It's to make the assumptions behind the plan a little more realistic.

Some Decisions Deserve A Trial Run

Retirement often brings several major decisions together at roughly the same time. People may finish work, sell a business, downsize their home, relocate, change the way their money is invested and begin drawing from savings they've spent decades accumulating.

Each decision may make sense individually, but making all of them at once can leave very little room to discover that one of your assumptions was wrong.

Where possible, I've always preferred keeping options open.

If you're unsure whether you'll enjoy living in another part of Australia, renting there for a period before selling the family home may tell you more than years of discussing it. If you think you'd like to consult after leaving a senior role, start exploring what that might look like while you're still connected to your professional network. If you expect to spend several months travelling each year, try an extended trip before designing your entire retirement budget around it.

There is no prize for making every retirement decision on the same day.

In fact, one of the advantages of planning early is that you can separate those decisions and give yourself time to see how each one feels.

I've seen enough of life to know that people change their minds, circumstances change and things that looked enormously important at fifty-five can feel surprisingly unimportant at sixty-five. A good plan should be able to accommodate that rather than locking someone into a version of the future they imagined years earlier.

Retirement Planning Is Really About Creating Choices

When I started this series, I asked whether some people who say they want retirement might actually be looking for greater control over their lives. We then looked at the possibility of moving gradually away from full-time work and, in Part 3, at what replaces the routine and sense of purpose that work has provided for decades.

Perhaps the idea that connects all of those conversations is choice.

Financial independence matters because it gives us choices. It can give us the choice to work because we enjoy it rather than because every dollar of salary is required. It can give us the choice to spend more time with family, travel, contribute to our community or simply have more control over an ordinary Tuesday.

Good retirement planning, in my view, isn't about constructing a perfect thirty-year plan and then following it regardless of what happens. Life has never worked that way. It's about creating enough financial flexibility, self-awareness and room to change direction that the plan can evolve as you do.

That's why trying parts of retirement before you retire can be so useful. You're not trying to predict your future self. You're giving yourself better information about the person you are becoming.

You may discover that you can't wait to finish work completely. You may decide that three days a week feels surprisingly good. You may realise the sea change you've talked about for fifteen years isn't actually for you, or that you need far less money to live well than you had imagined.

There is no right answer.

The useful part is finding your answer while you still have plenty of choices about what to do with it.

After all, retirement is one of the few major stages of life we often have years to prepare for. It seems a shame to spend all of that time preparing the money without occasionally trying the life the money is meant to support.