Road Testing Retirement

There are three kinds of retirees, according to a financial planner quoted in a recent personal finance feature in The Wall Street Journal.

These three types of retirees are tagged:

  • “Cliff divers” who fully retire upon reaching what they regard as the normal retirement age.
  • “Worker bees” who keep delaying retirement and work well into their sixties.
  • “Retirees in training” who keep working – sometimes part-time – yet begin to enjoy some of the lifestyle they intend to have in retirement.

The column – headed How to Get to Retirement? Practice! – discusses why road-testing retirement rather than abruptly retiring on a given date can make sense.

“Working through your sixties, even if only part time, allows you to spend your wages instead of your savings …,” the article emphasises. “This gives your nest egg more time to grow and shortens the time you’ll need to support yourself on savings alone.”

And by experiencing somewhat of a retirement lifestyle in advance – perhaps involving more travel and other leisure activities – you may gain more of an idea about how you eventually wish to spend your time in retirement.

Australians often take transition-to-retirement (TTR) superannuation pension in order to experience a taste of retirement before actually retiring full time. Super fund members aged 55 upwards can access their superannuation savings through a TTR pension without having to retire.

Retirement and Retirement Intentions, Australia, July 2010 to June 2011 , published by the Australian Bureau of Statistics, shows that of the 4.9 million people in the workforce aged 45 years and over when the survey was conducted, 79% intend to retire in the future.

However, of the remaining one million people, 399,300 did not know whether they intend to retire while 653800 never intend to retire.

By Robin Bowerman
Smart Investing Principal & Head of Retail,
Vanguard Investments Australia
18th February 2013

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