Rhonda and Mike made a costly mistake when it came to their retirement plans and it didn’t have anything to do with how they invested their nest egg or the golf clubs they chose. It was where they decided to live.
They loved their vacations in Europe and decided to buy a place to retire in Malta, a stunning archipelago off the coast of Italy. But the couple hadn’t done a dry run and learned very quickly that the weather in winter wasn’t always so idyllic, and that they really missed their friends back home.
You can learn from their cautionary tale by taking your retirement plan for a test drive. Sure, you can only do so much to simulate what your life will be like when you’re no longer drawing a pay cheque, but give it a go. Take part in the activities you think you’ll want to do, spend only what your retirement budget will allow, and try out—for a short period at least—the country, new town, or downsized condo in which you plan to live.
We talk incessantly about the financial side of your retirement plan —rate of return, tax efficiency, income splitting and RRIF drawdowns. But your happiness in this stage of life is also deeply affected by the activities you take part in and the relationships you nurture.
The test-drive approach can illuminate what you actually enjoy, versus the fantasy you see in advertising. Those slim, silver-haired stock photography models seem to be having a great time riding a Vespa in Tuscany. But is that what YOU want? A test-drive will also help you see if you’re really ready to retire, or if a more gradual transition might be a better option.
Of course, a lot of people resist retirement planning because they fear change, the loss of identity that work provides and, perhaps most importantly, their own mortality. The test drive approach makes retirement more of a reality instead of just a theory. And most of us tend to pay more attention to what feels real, even if it scares the hell out of us.
Here are some suggestions for getting started. First, print off a calendar for one week and write down how you might fill your time. Is it easy or difficult to figure out what you’re doing to do once you’re caught up on all your chores? Next, think about whom you’re going to spending your time with. Work provides a ready-made community, and that can be tough to replace when you’re no longer showing up at the same place every day. It turns out those relationships really matter to your health. According to research from the Stanford Center on Longevity, “socially isolated individuals face health risks comparable to those of smokers.”
At this point, you might also want to update your financial plan to ensure your finances are also on track to support the lifestyle choices you plan to make in retirement. As your financial picture changes, your plans might change, too.
Talk to your spouse and friend. And arrange a meeting with your advisor to review your plan. All of that will give you the confidence you need to move forward with fewer worries.
The last, and toughest step of the test-drive, is to take time off work to give it all a try—a few weeks will give you a better sense of things than just a one-week trial. Remember, retirement isn’t just an extended vacation. It is more like being unemployed, but without the focus on getting a new job. You have to find ways to fill your days with whatever it is that makes you happy. Believe it or not, that is no easy task.
There are limitations to the test drive approach, of course. It is a short-term experiment and the stakes are low. Think about parenting. I had babysat for years and had lots of diaper changing experience. But that didn’t prove to be a comprehensive look at what being a parent is actually like. And remember, with life expectancy in Canada on the rise you could be in the retirement life stage for decades. All the more reason it’s best to check out your options, so you can make the best use of that time.