Baby boomers in their 60s often feel it's too late to make a difference in their future retirement security. But that may not be the case, according to Christine Fahlund, CFP, vice president and senior financial planner at T. Rowe Price.
In her keynote presentation Friday morning at the Retirement Income Symposium in Boston, "Retirement Income—Behind the Numbers," Fahlund suggested that by "practicing" retirement until age 70 without quitting work, boomers can still get time on their side.
To illustrate this idea, Fahlund showed videos featuring several real-life couples' takes on it. "Retirees in training" continue to work, living on their regular paychecks and not tapping retirement income from Social Security, savings, and potentially a pension or annuity before age 70. This hiatus gives benefits and earnings the opportunity to continue compounding. With extra cash freed up by suspending savings contributions, clients can try out RV travel, book-writing or other pursuits they hoped to adopt after retirement.
Delay the Date, but Not the Gratification
Fahlund sees the Practice Retirement concept (a term T. Rowe has trademarked) as giving advisors a positive, "glass half full" message to replace the "glass half empty" story that discourages so many boomers. "Instead of saying, 'Your numbers aren't good enough for you to retire right now,' you can give them permission to enjoy their vibrant 60s," she said. "You can say, 'Let's get on with figuring out what you're going to do in retirement.'"
Besides letting clients explore their options, the Practice Retirement phase offers them an opportunity to get their house in order by paying off the mortgage, settling credit card debt, getting big-ticket purchases out of the way and reducing monthly bills. In other words, they can become better prepared for full-time retirement, both financially and emotionally.
Fahlund walked RIS participants through a Practice Retirement kit that includes worksheets to help clients identify the role of work and play in their life, and a "balance sheet" to record what they hope to do during their transition years. A hard card shows examples of replacement income if Practice Retirement is adopted at varying ages. (More information is available at practiceretirement.com.)
