May 23, 2014
|Chris Fahlund, Ph.D., CFP®, is a senior financial planner and vice president of T. Rowe Price Investment Services.|
When people think about retirement, they often focus on how they can prepare for this transition financially. I know I have. With my own retirement at hand, I have also tried to prepare for the mental and emotional aspects of this change.
I have long encouraged investors to try out their vision of retirement before they make the leap permanently. Doing so allows you to make adjustments or changes to your plan as you experiment with your retirement lifestyle and finances. My husband and I have approached the lead-up to our retirement in this way. First, we tested our assumptions about how much money we needed to live on. We also gave ourselves permission to start some of the activities we anticipated doing in retirement, such as traveling.
I have been preparing for retirement financially since I started my first teaching job. Even so, the process of testing our assumptions about retirement helped reinforce some of the initial decisions my husband and I had made—and allowed us to see how other assumptions needed to change. For instance, once I understood how much we could potentially receive in Social Security benefits by waiting until age 70 to claim them, we realized we didn't need to save as much as we once thought. We also realized we might be better off than expected even if we retired in a down market. As a result, we temporarily reduced our contributions and used that money to fund a few trips instead. Although I later went back to a full savings program, it was a good opportunity to try out our vision of retirement. We also have been able to advance our charitable giving timetable and have begun contributing to a donor-advised fund now instead of waiting until after we retire.
The Last Hurdle
For me, the best thing about readying for this transition was the mental preparation. The financial preparation makes the leap more comfortable, but I have worked hard on feeling emotionally ready to retire. I love my work, but I came to realize that it is time to start the next chapter of my life. I am ready to focus on new projects, such as the historical biography I have been writing, as well as spending more time with my seven-year-old grandson. While there may be days when I question my decision, the gradual approach I've taken has helped me realize that I am more than ready to welcome this next stage.
To assess your own transition into retirement, use the Practice Retirement® tools and guides.