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Your Bank > Education and Advice > CNB University

Practicing Retirement

J Terwilliger 2014
James P. Terwilliger, PhD, CFP® is Senior Vice President - Financial Planning Officer and can be reached at JTerwilliger@CNBank.com or (585) 419-0670 x50630.

Practice retirement? That sounds a bit strange.

After all, isn’t retirement the time to kick back, relax, and do the things you have always dreamed of doing? No work-related time pressures, no schedules, no assignments due. What’s to practice?

But think a moment. We’re talking, maybe, 25-30 years or more. For some, retirement will last longer than the years spent working.

Calling an abrupt halt to a decades-long regimen of waking up to an alarm clock, following a schedule, interacting socially each day with co-workers, and contributing to an institution’s success might turn out to be more than you bargained for.

Filling the 40-or-more hours per week – 1/3 of a workweek – with something meaningful doesn’t just happen without some serious planning and, yes, practice.

The other consideration is the financial factor. Can I afford to retire? Will I run out of money? Will my standard of living change? How can I deal with being on my own financially, no longer having a steady paycheck?

Let’s start with the financial piece first. This is easier to assess.

First, I always recommend seeking the guidance of a fee-based financial planner. Whatever your age or station in life, a competent planner can help you understand what you need to do to reach your retirement goals – in terms of a retirement date and a desired ongoing spending level. Such guidance will take inflation into account, so that your targeted spending is based on a desired purchasing power.

If it turns out that not all of your goals can be met, you can examine alternatives and understand what needs to be done to meet the most important goals, based on priorities. Or reset your goals so that they are achievable.

Second, you can construct some ballpark estimates yourself. Using projected investment/retirement account balances at your desired retirement date, calculate a sustainable gross income by adding your anticipated household income streams (Social Security, pension(s), and others) to the dollars you can expect to safely extract annually from your nest egg (initially, about 4%-5% of your total account balances if you have a well-diversified set of investments).

Knowing these numbers is the easy part. The tough part is how to deal emotionally with such a huge transition in your life, much bigger than the one you experienced when transitioning from life as a student to entering the workforce.

This otherwise-radical change might instead take several forms during the first several years of retirement.

  • Ease out – Some companies allow “retirees” to go part-time, either as a W-2 employee or as a contractor. While the work itself might be different, this may allow you to maintain the structure and mental stimulation that a job has offered for several decades. It also provides steady cash flow for the household, perhaps allowing you to defer starting Social Security benefits to, say, age 66 or 70 to yield a higher monthly benefit.
  • Volunteer – There are countless local charities that depend on a vital, active volunteer force to fulfill their missions. Volunteering can be as simple as addressing envelopes or as complex as serving as president of a hospital or school board. Everyone has something to offer. Each such opportunity to contribute will pay back many-fold in terms of personal satisfaction.
  • Become reacquainted with your hobbies – The initial years of retirement offer the chance to redevelop the hobbies you have not had time to enjoy during your working years. And, I don’t mean golf and checking off the to-do list. While these activities have their place in a meaningful retirement, too much of either gets old after a while. If you do not have any hobbies, you had better start to develop some. Twenty-five-to-thirty years of retirement are a long time.
  • Visit places you may want to relocate to – Some folks dream of relocating to Florida or Arizona or … following retirement. This may be additionally attractive, given the recent drop in property prices there. But, before you do, plan to visit such places, on an extended basis if possible, to see if the grass is really greener. Sure, there are a lot of reasons to consider relocating, but where do you feel most “at home”. It may just be western New York. 

While these examples can all wait until retirement, the idea of “practicing” suggests that sooner-rather-than-later is a good idea. That is, consider and experiment with what will occupy your retirement time and energies …way before retirement. I bet you’ll be glad you did.

This material is provided for general information purposes only and is not a recommendation or solicitation to buy or sell any particular security, product or service. Past performance is not indicative of future investment results. Any investment involves potential risk, including potential loss of capital. Before making any investment decision, please consult your legal, tax and financial advisors. Non-deposit investment products are not bank deposits and are not insured or guaranteed by Canandaigua National Bank & Trust, or any federal or state government or agency and are subject to investment risks, including possible loss of principal amount invested.