When planning for retirement, consider a potentially more enjoyable, different approach. Consider whether or not you would want to start "playing" while you continue working during your 60s—testing out some of your retirement dreams while you still have a financial cushion in the form of a salary and benefits.
Practice Retirement® tools and resources may help you determine the right balance of time, money, work, and play.
- Practice Retirement®
- What are the benefits of exploring the Practice Retirement® tools and resources?
- Should you still make contributions to your 401(k), IRA, or other retirement savings accounts?
- How much should you have saved before you actually retire or before you start test-driving retirement?
- Should you take Social Security benefits while test-driving retirement?
T. Rowe Price is offering Practice Retirement® tools and resources that help preretirees transition to full retirement. This transition time will allow you to continue to work in your 60s while you start "playing." During this time, you can consider discontinuing contributions to your retirement savings accounts and delay taking Social Security benefits. This could allow your retirement nest egg to grow tax-deferred for several more years, subsequently increasing your overall retirement income when you do decide to fully retire or start taking withdrawals. Working longer allows you to continue to enjoy a salary and benefits while incorporating into your life some of the activities that you would have put off until you were fully retired. This also provides an opportunity to explore whether the way you thought you wanted to spend your retirement is really right for you…maybe you discover that RVing across the country isn't as fun as it sounded and being closer to family is important now. Use the Training Manual, a Practice Retirement® tool, to help you explore how you may want to spend your transition years.
You can discover what you really want to spend your time doing when you fully retire while you still have the safety of benefits and a salary. You can take the time for experimentation and personal reflection, easing into a lifestyle change that can sometimes come as a shock to those who spent their lives working all day everyday for 30, 40 or even 50 years! Additionally, you have the opportunity to use your salary to pay down debt, pay off the mortgage, or splurge a bit by purchasing that new car or treating your family to that dream vacation rather than carrying those financial obligations into full retirement.
While working longer and delaying Social Security benefits are key components, continuing to contribute is a decision that each person must make based on his or her own financial situation and comfort level. The most appealing aspect that the Practice Retirement® tools and resources address is the balance between work and play providing an option to use the money that you would usually contribute to your retirement accounts to test-drive activities and explore your interests before you fully retire. However, we do encourage you to contribute at least enough to qualify for an employer match in your 401(k), if available.
Generally, if you have saved four to eight times your salary, the Practice Retirement® tools and resources may be very helpful as you plan your transition to retirement. In particular, consider the Retirement Income Calculator to provide a quick snapshot of your financial situation.
Consider waiting until the age of 70 or as close to it as possible before taking Social Security benefits. Every year that you wait up to age 70 will increase your starting payment by approximately 7%—8%, in addition to inflation adjustments you may receive. This provides a significant opportunity to improve your financial security in retirement. And since these benefit increases are based on Social Security formulas, not volatile market conditions, they are predictable. If you are married and think waiting may be difficult, you could consider having the higher wage earner wait as long as possible. This way, regardless of which spouse is the survivor, he or she will be eligible to receive the larger of the two spouse's benefits for the remainder of his or her retirement.