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Why You Should 'Trial Run' Your Retirement

You can learn a lot from a practice round.

Susan Dziubinski: Hi, I'm Susan Dziubinski for Morningstar. Retirements have accelerated over the past year, thanks to a combination of strong market performance and the pandemic. But before you hang it up, Morningstar's Christine Benz thinks it's a good idea to trial run your retirement. She's here with me today to discuss that concept.

Hi, Christine. Nice to see you.

Christine Benz: Hi, Susan. Great to be here.

Dziubinski: You think it's a valuable exercise for pre-retirees to go through a bit of a discovery process before they go ahead and retire. What's the first step in that process?

Benz: I think the first step is to think about your work and think about what aspects of it you still enjoy, and those aspects that you really have no time for, no room for, and just start keeping some notes on those matters. Because certainly everything we know about retirement planning is if you can shorten the length of retirement because you have continued to find gratification in work that really helps financially. So start with that job, then spend some time thinking about your actual nonwork activities, the things that you want to pull forward in retirement. These are maybe things that you right now just sort of tuck around the margins of your life because you really don't have time. Start thinking about the contours of that--how pulling some of those activities forward might change how you choose to spend your days.

And then last but not least think hard about lifestyle considerations. For many retirees, relocation or partial relocation to second homes might be part of the equation. Think about whether you'll be relocating. Think about what your spouse's plans are. I think couples very much should approach retirement planning as couples, where they're thinking about their respective visions for retirement. Those two things might not match up. Those retirement dates might not match up. So start thinking about your plans as a couple and think about if your spouse is working, what is his or her plan for a retirement date? So start with some of those lifestyle things.

Dziubinski: The idea of a trial run of your retirement is very compelling. How can someone go about trying to do that?

Benz: I think the key is to think about your situation with work. If you're a long-tenured person where you have a lot of vacation time or perhaps you work for a small employer where you have maybe some wiggle room to negotiate extra time off, in that instance, you may want to think about using some of that vacation block to actually spend time at home experimenting with what retirement might feel like for you. So if you wanted to pull certain activities forward, like golf or volunteering more often, you can spend more of your days doing those activities. I would also take stock of how your spending patterns change during that period, you may find that you have more time to make meals at home, or maybe you're going out all the time, whatever it might be. There may be takeaways for your retirement plan and for your budget as a result of having taken this long break from work.

Dziubinski: What would you suggest for people who may not have a block of vacation time they could use or maybe those who are nearing retirement age and they don't want to possibly telegraph that their trial-running their retirement--what are some things they could try out?

Benz: There are a few different ideas. One is to take sort of a mini version of some of the vacation time that we talked about. So maybe just use a week to do some of the activities we just talked about if your vacation is shorter. You might also think about incorporating some of the activities into your day-to-day life. I know for a lot of us, we say "Well, when I retire, I'm going to exercise more and volunteer and read a book a week." See if you can't start making small changes to make some of those things happen while you're still working. And I would also note, Susan, is that through this period, many people have determined that they have a little bit more flexibility in terms of where they work than they did prepandemic. A lot of employers are really loosening up about having everyone be in the workplace. So if your employer is somewhat flexible, maybe you can experiment with a different location even while you're continuing to work away from what had been your home base. So I would say get creative, but the idea is that you're not hanging it up and retiring and experiencing something like retirement for the first time. You'll have dabbled a little bit and figured out what you want to do beforehand.

Dziubinski: Let's pivot and talk more about the financial aspect of this now. How can you trial run that financial aspect of retirement?

Benz: Right. I mentioned that these mini breaks might be a good way to see how your spending habits might change. And again, you're just observing, not necessarily making judgments, just observing those. And the other thing I would note is that you definitely would want to take stock of how your budget might change. Many people expect that they will spend less in retirement, you know, you hear these 75%- or 80%-income replacement rates in retirement that people often use as a baseline in retirement planning. Well, there's a lot of variability in those numbers. And we know that higher-income people tend to spend a lower percentage of their working income than 75% or 80%, on average. They're more like in the 60% range, whereas lower-income workers are at a higher level. If cutting costs in retirement is a big part of making your retirement plan work, really think about how your personal spending may or may not change.

Dziubinski: And lastly, Christine, you've written a very popular article on about how you used Morningstar's six-week sabbatical, which we get every four years as employees at Morningstar. And you dubbed it: This is how I spent my faux-tirement. And it was sort of your trial run of retirement. What were some of your key takeaways from that experience?

Benz: Yeah, this was back in 2017. And I took a nice trip with my husband for our then 25th anniversary. But after that I had a whole month at home. And I did come up with a few takeaways. One is that I loved that my powers of concentration improved during that period. I am always multitasking across things. In fact, I always know approximately what time it is within like a five-minute window. And I found that I was really able to stay on task, stay focused. I wasn't jumping from one thing to the next. Another takeaway for me, Susan, was that balance was so important--that the days that I thought were my best days were the days where I knocked off some task or did something that I had really been meaning to do and then balanced that with something that was really fun. Whether it was a great dinner or time with friends or whatever it was. And I think that's an important takeaway that I'll bring into retirement--not that I'm retiring soon--but this idea of balance and trying to continue to get stuff done even when I retire I think will be really important for me. It's not just going to be kicking back because getting stuff done helps you appreciate your relaxation time that much more.

Dziubinski: Right. Well, Christine, thank you so much. This is a great concept to trial run the retirement, and I am going to think about how I'm going to do it myself.

Benz: Absolutely.

Dziubinski: Thank you for your time.

Benz: Thank you, Susan.

Dziubinski: I'm Susan Dziubinski with Morningstar. Thanks for tuning in.