Retirement: Lessons From the First Year

Here are five battle-tested rules for surviving that dreaded "now what?" stage of retirement.

By Ellen Florian Kratz

July 20, 2007

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"Free time is an expensive proposition, especially for the affluent," says Joanna Rotenberg, the consultant who headed up the study. Complicating the spending picture is the transition from traditional pensions, which acted as a de facto budget, to defined-contribution plans, which require the retiree to exercise spending discipline.

"With pensions, you didn't have a wad of cash to tap," says Alicia Munnell at Boston College's Center for Retirement Research. "With the 401(k), people have to face the challenge of how to use that money over the rest of their life."

Travel is usually high on the list. According to the study, 65% of affluent retirees are setting off to see the world. And when it comes to those leisure pursuits, 55% didn't expect them to cost as much as they did.

Even day-to-day expenses can take well-to-do retirees by surprise—half are paying more for things like utilities, property taxes, and groceries than they anticipated.

And children, no matter what age, can be costly—10% of retirees have kids who are still living off Mom and Dad.

So the rule of thumb is not retirement gospel. "Think about the full cost of what you want to do, and build it into your financial plan," says Rotenberg.

That bottle of Krug you've always wanted to sip with your spouse on the French Riviera does not come cheap. Neither does helping your 30-year-old with a down payment on a house.

Don't put that brain away: You're not done working

Of course, there is an antidote to increased spending: a job. "Unless you're really wealthy, consider working in retirement so that you don't have to start spending that nest egg right away," says Dychtwald.

You won't be alone. According to a Vanguard survey released this year, 61% of Americans between the ages of 40 and 69 indicated that retirement would include some form of labor.

Dennis Wyman, a former systems engineer and trade show manager for Intel, originally planned to retire at age 62. But last year, when the company laid off more than 10,000 employees, he had to retire three years early. Fortunately, his wife is working full-time. And he had managed to build up more than $400,000 in his 401(k) and another few hundred thousand in his IRA, so they weren't in financial straits. Still, he's just 60, too young to start drawing down the nest egg. "We need it to keep growing," he says.

He decided to work, under one condition: It had to have an element of play. An avid cyclist—he has twice completed the 450-mile Cycle Oregon—he has long enjoyed fixing bicycles.

His new career: mechanic at a local bike shop. "Learning something new is exciting," he says.

So is keeping your brain stimulated. "Retirees want to stay intellectually challenged," says Brad Lawson of YourEncore, an organization that connects highly skilled retirees with Fortune 500 companies who need help with short-term projects.

"They want to continue to leverage their expertise." Davey Scoon, 60, the former CFO of Tom's of Maine, teaches managerial accounting each fall at Tufts School of Medicine and chairs the audit committee of two publicly traded companies.

"If I didn't have a reason to stay up on financial accounting, I wouldn't be happy," he says. "Being with people who are working on exciting businesses makes life interesting."

Make peace with your post-big-shot identity

A little work staves off money shortages and boredom; it can also prevent identity crises. "In this culture, you are what you do," says Jon Duncan, a Seattle-based financial and retirement planner.

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