The following is a guest post by Greg PHELPS, CFP®, CLU®, AIF®, AAMS®, a CEFEX certified fiduciary financial advisor, speaker, author, and the creator of the Wealth Summit. Greg has his own financial planning practice at Redrock Wealth Management
I came across this interesting concept the other day called the “retirement rehearsal”. Apparently, something like 50 billion dollars of vacation time goes unused – or lost – each year when people retire.
The retirement rehearsal concept is to plan years in advance of retirement to actually use those dollars to “try” being retired. It’s an interesting concept so I spent a bit of time learning more.
Over 50 billion dollars worth of vacation time is lost each year when people retire. Click To TweetThe Retirement Rehearsal
There’s an intangibility about what retirement might look like for most people. Many people think retirement is trips to Disney World with the grandkids, traveling around in an RV, and rounds of golf every day. In reality, many retirees struggle to fill the 40 hour void left by the absence of a full-time job.
The first step in rehearsing your retirement is to make sure you have a written financial plan. The retirement rehearsal is useless if you can’t go back to a written plan and make the necessary adjustments.
There are several simple cash flow tools available online to help you start a retirement financial plan. If you really want to do it right, you may want to find a quality financial planner who can create one for a flat or hourly fee. The National Association of Personal Financial Advisors and the Garrett Planning Network are good places to start.
The retirement rehearsal process is meant to give us a little dose of retirement lifestyle reality. Typically you’d do this 2-5 years before retirement.
You start by using up a few weeks of that valuable (yet often underused) vacation time to see what life after the 9-5 grind looks like. You should stay at home and do absolutely nothing. Crazy as this sounds, you’ll see how your expenses during that time correlate with the amount your written financial plan has allotted.
The Number One Enemy of Retirement
Are you spending more or less than anticipated? Are you climbing the walls needing something to occupy your time? Or are you content and relaxed in your future retired position?
Boredom is the number one enemy of retirement, usually inciting an unplanned vacation or unnecessarily large purchase. Such an impulse move can drastically throw off your retirement plan.
These big unplanned for expenses are the same as stealing from your 70, 80, and 90 year old self. If you can go the extra mile before retirement to make sure you won’t have these financial “urges”, it can really protect and improve your retirement finances over the long-term.
Many people who conduct a retirement rehearsal and realize they’re not quite ready to fully retire yet. They then transition into a “practice retirement” as an alternate.
A “practice retirement” means phasing yourself out of your career in increments. You either use the heck out of your vacation days while still working, or drop down to part-time work.
With a “practice retirement”, you’ll begin to live like you’re retired. The neat part is you’ll still be making contributions to your retirement accounts and allowing your portfolio to grow.
Both of these concepts help “ease” you into your next big phase of life. They’ll also help you head into retirement with a disciplined, prepared mindset about what the final phase of life looks like.
The Wealth Summit
I found “The Retirement Rehearsal” concept over at the Wealth Summit. It’s a collection of interviews and panels of 30 or so money experts from companies like Vanguard, TIAA, and Dimensional Fund Advisors. You can grab a free ticket to the Wealth Summit here.
The speakers at the Wealth Summit aren’t pitching products or trying to convince you to hire them. Rather, you’ll find a lot of quality financial plan and investing strategy taught by some highly qualified speakers.
Other topics include Social Security claiming strategies, making the most of your 401k, Roth conversion and recharacterization strategies, and my favorite, minimizing your lifetime taxes.
So if the retirement rehearsal sounds interesting and you’d like to learn more about financial planning, check out the Wealth Summit. . . it’s free after all!
Greg PHELPS, CFP®, CLU®, AIF®, AAMS® is an accomplished CEFEX certified fiduciary financial advisor, speaker, author, and the creator of the Wealth Summit. Greg has helped thousands of people achieve and master their own retirement wealth over the last two decades with his practice at Redrock Wealth Management.
I am intrigued by the “retirement rehearsal” idea. I have often heard about the mini-retirement or sabbatical, but this sounds like a softer approach to testing out a retirement lifestyle.
I like how you started right off by encouraging people to have a written plan. I’m currently in the midst of a Retirement Rehearsal and have the written plan and is in motion and learned it’s dynamic.
I’m glad you mentioned unnecessary large purchases, these sorts of things can derail anyone. I am budgeting for some necessary capital expenses which need to be planned for while I still have a steady corporate income stream. Things like a replacement water heater, sump pump, new roof are coming due. These line are considerable spikes in my spread sheet. The unnecessary expenses, the “wants,” is what’s lurking the shadows of boredom. Rehearsal is designed to enlighten me and to learn if these “wants” fit the plan and my new life style. In most cases, the urge goes away, but a FAT FIRE might help the padding.