Retirement is a time of great financial uncertainty and worry for many people. The common thinking is that you spend less in retirement than you did when you were working. Once you’ve retired, you no longer have the expenses associated with a commute, eating lunch out, new suits and career upkeep like training and so forth. But the reality is that many retirees spend more in retirement, at least in the first few years. New retirees like to catch up on home maintenance and feed their pent up thirst for travel. And don’t even get me started on greens fees!

So what’s a prospective retiree to do. Put your retirement plan to the test of course. A dry run in the years leading up to your target retirement date can help you see what kind of lifestyle you’re actually in for while you still have time to adjust.

Here’s a simple, 3 step approach:

1. Track spending. Get an idea of what your expenses are that will carry over into retirement. You want to track your cable bill but not what you spend on lunch with the guys from work or bridge tolls, for example.

2. Create a budget and stick to it for a year or two. Once you have an idea of what you think will be your expenses in retirement, create a budget and limit yourself to living on that amount.

3. Invest the money you’re not using into your retirement account. Take the difference between your budgeted expenses and your income and invest or stash it in a savings account. This will let you see what retirement will be like while increasing your retirement savings – a win-win!

The end result of this process is an emotional preparation as well as financial test drive. You will see if you really are ready to retire or not. If you are, then you’ve gotten some practice and some extra savings. If you’re not, then you’ve got some work to do. Get your financial house in order, minimize expenses, maximize savings and investigate other options like working longer, or part time in the early years of retirement. Whatever the outcome, you want to become aware of any problems before you’re on that fixed income and have less options.

Photo © carlos170691 (is busy with his assignment)

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