A retirement test drive is necessary for anyone who is within five years of retirement. Would you buy a car without first test driving it? Of course not. So why would you retire without having some reassurance that retirement will work for you?
It can be difficult transitioning from structured workdays into a life without a schedule. A retirement preview allows you to try it out before fully committing. Talk to your employer to see if you can arrange three months or even a year off. Here are some factors to consider during a practice retirement.
Evaluate your finances. As you near your retirement date, you should already have a plan for retirement income. Calculate the amount you will get from Social Security and a traditional pension if you have one. You should also figure out how much you can safely withdraw from your 401(k) and IRA each year and add that to your Social Security and pension income. This will be your post-retirement base income.
Test out your budget. Expenses generally decrease after retirement. A retirement preview is a great opportunity to see if you can live on the amount your Social Security and investments provide and research if there will be new expenses that will crop up after retirement. Some examples of additional expenses in retirement are heath care costs and travel.
Fill your days. Most people spend eight to ten hours a day working and commuting. Once you retire, you will have a huge hole in your schedule. What are you planning to do at 9 a.m. if you don't have to be in the office? A retirement preview is the perfect chance to see if you can handle the extra time. There are many options for a retiree, but you won't know if you will like any of them unless you try them out. You can use the time to pursue a hobby or passion. Many retirees volunteer at a museum, library, school, or other organization. You can take some classes and learn new skills. If you are used to working full time, it won't be easy to figure out what to do with the extra free time.
Cultivate your social and support network. Many people have friends and a support network at the office. It can be difficult to leave a great group of friends behind. All your friends will be busy working after you retire and the opportunity to socialize will be greatly reduced. You will have to find new friends and colleagues in retirement. Volunteering is a great option to meet like-minded people.
Taking a retirement preview will help you figure out if you are ready for retirement. If it works out, you will be more confident about entering retirement in a few years. If there are issues with finances or if you are not mentally ready to retire, then you can take corrective action and make a plan to address those issues.
Joe Udo is planning an exit strategy from his corporate job by reducing expenses and increasing passive income. He blogs about his journey to early retirement at Retire by 40.