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Retirement is often a daunting concept. The most obvious concern is money—many of us worry we won’t have enough to retire comfortably or even at all. But until you live through it, your retirement plans are based on guesses. Is your financial plan practical? Will you get restless? Will you miss the work routine? There are plenty of things you should address before retirement, but perhaps the most essential is the 'pretirement' phase.
What exactly does 'pretirement' mean?
'Pretirement' serves as a 'stress test' for your retirement plans, giving you the chance to adjust them while there’s still time. Even if you're in your 40s or 50s with decades left before actual retirement, you can start engaging in a pretirement phase as long as you have solid plans in place. This phase mimics retirement conditions—like budget limitations and lifestyle choices—to help you evaluate whether they truly work for your future.
For some individuals, pretirement is a gradual transition from full-time work to complete retirement, allowing them to slow down and adjust to a new lifestyle. However, not everyone has the luxury of simply reducing their work hours. For most people, pretirement becomes a periodic process that helps ease worries and doubts about whether retirement is truly achievable. There are various tools available to guide you in creating a pretirement plan, but it’s quite simple to think through it on your own.
Step one: Create a plan
The first step is to develop a plan that will serve as a stress test for your retirement goals. Retirement planning typically consists of two major aspects:
Budget. When most people think about retirement, the focus is usually on finances: How much money will you have? Creating a retirement budget involves calculating income from retirement accounts (IRAs, 401ks, etc.), Social Security, and any additional sources. You should also consider whether you plan to stop working entirely, work part-time, or have a side gig, and include an estimate of those potential earnings. Don’t forget to account for taxes and other expenses (such as housing and healthcare) to get a clear picture of your financial situation.
Lifestyle. What does retirement look like to you? Traveling the world? Relaxing at home? Laying on the beach? Visiting family and friends across the country? The more specific you can be about how you envision spending your time, the better. If you’re considering relocating, research potential places you might want to live. The clearer your vision of retirement, the more effectively you can test your expectations.
Step two: Test your plan
Once you have a clear picture of your retirement income and lifestyle, it's time to put your assumptions to the test. The closer you can get to real-life conditions, the more valuable your stress test will be. An effective way to do this is by using vacation time to experience 'mini-retirements,' which simulate the retirement lifestyle you’re planning for.
If relocation is part of your plan, choose one of the locations you're considering and spend as much time there as possible. Live in the way you envision your retirement, and evaluate the experience truthfully. Does lounging on the beach every day lose its charm? Do you find yourself missing structure? Is the side hustle you anticipated to boost your income harder to manage or less profitable than expected? Even if you don’t plan on relocating and intend to stay in your current home, taking a week or more to live as you expect to in retirement can be eye-opening. You might assume that spending time reading and pursuing hobbies will be fulfilling, but it could get monotonous quicker than you expect.
It’s also critical to test living within the retirement budget you've set to determine if it truly meets your needs. If you find it challenging to stay within a certain spending limit, you may need to rethink your plans or explore ways to boost your income. If sticking to your budget proves difficult ten years before retirement, it’s unlikely that you’ll find it any easier when retirement finally arrives.
An often-overlooked element of retirement is how it affects personal relationships. If you and your partner are used to spending long hours apart at work, will being together all day, every day be an issue? Do you have a social life outside of work, or will you feel isolated? Were you able to stay connected with friends and family as you had hoped? While a short trial period may not be enough to fully test all relationships, it can provide useful insights.
Step three: Make adjustments
The last step in your pre-retirement strategy should be clear: If everything has gone as planned and you're satisfied with your retirement goals, fantastic! Continue with your plan as intended.
If certain elements of your retirement didn’t meet expectations or things went off track, it's time for a revision. For example, if your budget isn't aligning, it’s time to rethink: Can you increase savings? Should you consider a part-time job? Is selling your home a viable option? If you’re feeling isolated or unstimulated, moving far away from your current social circle and activities might not be the answer, or maybe it’s time to relocate nearer to family.
Of course, this scenario will vary for each individual. What’s important is to gather real data instead of relying solely on your assumptions. Retirement can drastically transform various aspects of your life, and understanding whether your expectations are realistic will help ease any anxiety and build the confidence that the plans you’re making today will yield the results you expect in the future.
