Retirement planning usually asks one question: Will we have enough money?
Pretirement asks a more practical question: Can we live comfortably on the income we expect to have after we stop working?
Instead of waiting until retirement to discover the answer, we can test that future income while we are still earning a paycheck. The experiment reveals whether our retirement plan works in everyday life—and gives us time to improve it if it does not.
What Is Pretirement?
Pretirement is a trial run for retirement. We estimate the income we expect to receive after leaving work, limit our current spending to that amount, and observe what happens.
The basic estimate can include:
- Projected Social Security benefits
- Pension or retirement payments
- A planned withdrawal from retirement savings
- Other dependable sources of retirement income
For a simple first estimate, we might combine projected annual Social Security benefits with 5 percent of our expected retirement-account balance. That figure is not a universal withdrawal recommendation. It is a starting point for testing whether our projected resources and expected lifestyle are reasonably aligned.
We should also account for taxes, health insurance, Medicare premiums, and other costs that may change after retirement.
Run the Experiment
Once we estimate our future monthly income, we try living on it while we are still employed.
Suppose a household currently brings home $8,000 each month but expects about $5,500 per month in retirement. During the Pretirement experiment, the household limits ordinary spending to $5,500 and directs the remaining $2,500 toward improving its financial position.
The test should be realistic. We still need to budget for irregular expenses such as home repairs, vehicle replacement, travel, medical care, and insurance. Ignoring those costs would make the experiment easier, but less useful.
Use the Difference to Strengthen the Plan
If we can live comfortably on the projected retirement income, the money we are no longer spending should not disappear into new purchases. It can be used strategically.
First, we can pay down debt. Eliminating credit-card balances, vehicle loans, or a mortgage reduces the amount of income we will need in retirement.
Once high-priority debts are gone, the excess can be directed into retirement savings. That creates a useful feedback loop:
- Living on less demonstrates that the retirement budget may be workable.
- Paying off debt reduces future expenses.
- Additional saving increases future retirement income.
- The stronger financial position makes the next Pretirement test easier.
The experiment does more than measure retirement readiness. If we follow through, it can actively improve it.
Learn From What Does Not Work
A failed Pretirement test is not a failure. It is valuable information discovered while we still have options.
If the projected income feels too restrictive, we can examine why. Perhaps our housing costs are too high, debt payments consume too much income, or our estimate omitted an important expense. We may decide to save more, work longer, change our retirement expectations, or look for a different way to structure the transition.
Discovering the problem several years before retirement is far better than discovering it several months afterward.
Test More Than the Budget
Pretirement can also reveal nonfinancial issues.
When we reduce spending, which activities do we miss? Which expenses contribute meaningfully to our lives, and which were simply habits supported by a larger paycheck? Does our imagined retirement include enough money for travel, hobbies, family, and home maintenance?
We can also use the experiment to practice the routines retirement will require: managing healthcare, organizing our time, maintaining social connections, and deciding what will give our days purpose.
Repeat the Test
Pretirement is most useful when repeated.
We might run the experiment at age 50, again at 55, and annually as retirement approaches. Each test can use updated Social Security estimates, account balances, pensions, expenses, and retirement dates.
Over time, the estimates become more accurate and our financial habits become better adapted to the life ahead.
Retirement should not be the first day we attempt to live like retirees. Pretirement gives us the chance to practice, learn, and adjust while time and employment income are still on our side.
Long View Media 