The leading edge of Gen X and the youngest Baby Boomers are staring down a short road toward retirement. Some are starting to hear tales from those who have crossed over to the other side — from full-time professional to full-time retiree — and wondering how they will hack life after work.
Shaking his head and looking off to some distant point, Dan, a recently retired 62-year old, remarks, “It just freaks me out.” Somewhat amused, I ask, “What does?” Dan’s head whips back around toward me and exclaims, “Time! I never knew how much time I would have in retirement! I wanted freedom from work, but now finding new stuff to do is a full-time job.” Another friend listening simply laughs and remarks, “I am sure that will be no problem for me.” Dan looks away again and dryly replies, ”You just wait.”
When it comes to making major purchases in life, we often have the opportunity to test out or experience what we are buying. Whether it’s a new car, a new home, or even a new outfit, we usually have the chance to drive it, walk through it, or try it on before making the decision to buy.
However, there is one major purchase in life that is unlike any other – retirement. Yes, despite the language around planning for or preparing for retirement, you are actually buying retirement.
Retirement is arguably the single largest purchase people make and very few have the opportunity to experience what it might be like before retiring.
Here is a little context on how different preparing for retirement is from almost any other major financial decision and life stage.
When choosing a college, you typically take a well-choreographed tour before choosing a state school, which may cost an average of about $104,000 for a four-year degree, or a private university, which is about $223,000 for a bachelor’s degree.
The average cost of a new car is nearly $50,000, but before plunking down the check, you take your dream wheels for a test drive or at least kick the proverbial tires. It’s effectively a ritual of the buying process.
Even when planning a wedding, which averages about $30,000, you tour venues, try on dresses, pick flowers, and often get to taste the meal before buying.
Of course, the big one is buying a home, which averages a cool $500,000-plus. Before taking on a mortgage you do a walk-through, open closet doors several times, and take several spins around the neighborhood. The broker may even offer you warm cookies to feel at home in your future kitchen.
Now, let’s talk about the selling price of retirement. Research conducted by the TIAA Institute suggests that by ages 50- 60, an average couple should have seven to eight times their annual salary saved to retire comfortably.
According to Smart Asset, the average annual income for an American couple in their 60s, if they are both working, is about $120,000, suggesting that they should tuck away somewhere between $840,000 and $960,000 for retirement.
Quite amazing if you think about it. To save nearly a million dollars requires significant discipline to delay or deny many of life’s pleasures and necessities to save, invest, and plan for something you have not even seen.
Unlike buying a new car, where you can take it for a test drive, retirement is completely unknown territory. There is also no warranty on buying a lemon retirement. And, like my friend Dan, buyer’s remorse could last years — maybe even decades.
Preparing for retirement is about far more than financial security, it is a major life transition that requires careful planning and consideration to ensure that you are both financially and emotionally prepared for this new life stage.
Here are nine ideas, some easier and more affordable than others, on how to take your dream retirement for a test drive.
- Start retirement shopping early, like the magic of compound interest, it takes time to accrue a full vision of what life after work might be like.
- Try living on what is likely to be your fixed retirement income.
- If you are planning to age-in-place, spend more time at home.
- Connect with groups or other people involved in the hobbies and past-times you plan to pursue.
- Travel to different destinations to get a sense of what retirement living there might be like and live as you might every day, not as if you were on a luxury vacation.
- Rent a home where you think you might wish to live.
- Considering a 50+ community? Arrange an extended stay.
- Plan to work a gig job or volunteer, try one out on weekends.
- Connect with retirees who are living the lifestyle you envision.
By speaking with retirees who are already living the lifestyle you think you would like, you can gain valuable insights and advice on how to plan and prepare for retirement. You can learn about their experiences, challenges, and successes to help you make informed decisions about your own retirement.
But, beware, like buying a car that’s a lemon, few of us are psychologically prepared to admit to others that we were taken and made a bad buy. Like me, you might learn a lot in a relaxed conversation over an adult beverage of choice.