A Retirement Dress Rehearsal Couples Can Try Before Leaving Work

Retirement brings major lifestyle shifts, from more time to travel and a looser schedule to the possibility of downsizing. Just as important, couples need to revisit their finances. Income, taxes and spending all have to be reviewed once work ends so they can support the lifestyle they want and make their money last.

A trial run can help put that plan to the test. Here’s how it works.

Why couples should rehearse retirement

Retirement can change both daily life and household finances in a big way, particularly when one spouse stops working before the other. A practice run helps couples see whether they can live on one income and prepare for the transition.

During the test, couples cover monthly bills, taxes, healthcare, travel and other costs using the fixed income they expect in retirement. Trying this for one to three months can make them feel more prepared.

How to run a realistic retirement test

The first step is to list every source of retirement income, including Social Security, pensions, expected portfolio withdrawals and any part-time work. Couples can also factor in how much cash savings they plan to use. The idea is to live only on that amount rather than the full salary and see whether it is workable. Redirecting current paychecks into savings or investments during the test can mimic retired life.

Some costs are easy to predict, such as housing, groceries and other long-term expenses. Others are often underestimated. Medicare premiums can rise over time, and supplemental coverage may become more expensive with age. Home repairs can also strain finances, and some retirees may need to help adult children, aging parents or both, depending on when they leave work.

Couples should also decide who will handle bill payments, investment management and other financial choices, since those duties may shift in retirement. The responsibilities can be shared or assigned to one person.

What the test may show and how to respond

The practice run can show whether a couple is truly ready for retirement and highlight any issues that need attention before leaving work. Some couples may conclude that retirement is not the right move yet, while others may find they can cover expenses on one spouse’s income. In some cases, they may simply need to cut back on spending expectations.

The exercise can also help retirees think through the best time to claim Social Security. If living costs are too difficult to cover during the trial period, delaying benefits may make sense, especially for those who had planned to claim at 62. The longer someone waits, the larger the monthly benefit generally becomes.

There is no need to “pass” this retirement test. Its purpose is to uncover weak spots while there is still time to address them. One thing it will not reveal is how required minimum distributions, or RMDs, will affect taxes. People with large pre-tax account balances could face significant RMDs later in life. Gradually withdrawing from those accounts over time can help spread the tax burden across a longer period.