Test Drive Retirement

“Money is only a tool.

It will take you wherever you wish,

but it will not replace you as the driver.”

– Ayn Rand


Have you ever purchased a car without test driving it first? I haven’t either.

What about an RV, a boat, a motorcycle, or an ATV? Would you purchase any of those without taking it for a test drive first? I wouldn’t either.

Why do we insist on taking a test drive before we purchase a vehicle; because it’s an expensive purchase that will have a major effect on our quality of life over the next few years.

Many years ago, after a lot of research, my wife & I thought we had found the perfect vehicle for our family. We were very tempted to make an online purchase, sight unseen. Thankfully, we decided that we’d better test drive that make & model before committing ourselves to spending such a large sum of money. We drove to a nearby dealership & climbed behind the wheel only to find that there was not enough headroom, uncomfortable seats, no backseat legroom, a clumsy control layout, and more. The vehicle that looked perfect on paper was in reality a terrible fit for our family.

We insist on taking a test drive before we commit ourselves to purchase a vehicle, because it’s an expensive purchase that will have a major effect on our quality of life over the next few years. So why don’t we test drive retirement before we commit ourselves to retirement, because the wrong retirement will affect our quality of life for more than just a few years … it will affect our quality of life for the rest of our life.


Over the years we’ve worked with more people than I can recall. The #1 goal for almost all of them was retirement; getting into retirement & staying there successfully. We were able to help most of them reach that goal, but there was a small percentage that failed miserably. They all reached retirement, but everything fell apart once they got there. For most of them, it was a slow, painful, financial death over the course of many years. But death did eventually come in the form of $0 savings remaining.

Lately, I’ve been thinking about those failures. In doing so, I found a common pattern among those couples;

  1. They all spent far in excess of what they had planned to spend.


These couples did almost everything right. They saved & invested. They paid off all of their debts. They worked with a professional financial advisor to develop a plan. One by one, they checked off all the boxes. The one thing they didn’t do was test drive their retirement to see if they could really live the way they wanted to live on the amount of money they told me they needed.


I ask everyone for whom we do retirement planning to give us a retirement budget;

  • How much money do you need every month to meet your basic needs; groceries, fuel, insurance, utilities, etc …?
  • How much money do you need every year to do the things you really want to do; travel, hobbies, large purchases, etc …? And how often do you need it; monthly, semi-annually, annually, etc …?


Those who have decades until retirement are giving it their best guess. The goal is so far away that it is a very hazy picture. That’s o.k. The picture should become clearer as time progresses, allowing us to tighten up our planning as they get closer to their goal.

I won’t accept a guess from those who only have a few years to the end game. I need a budget. When I’m given a budget, I usually ask some questions about it. If it makes sense, we’ll use those numbers. Most of the time, my questions result in budgets becoming larger.

Keep in mind that I can help anyone put together a budget. What I can’t do is make anyone stick to their budget. As a result, I’ve gotten in the habit of recommending that everyone test drive their retirement budget for a few months before retirement.

What is a test drive? Take your retirement budget and live on it for 6 months. Don’t vary it by 1 penny. The exception are expenses you cannot control, such as the cost of employer provided health insurance, and expenses you should continue to have until retirement, such as 401(k) contributions. Test drive what you’ve budgeted for groceries, utilities, fuel, travel, entertainment, charitable giving, etc …. Are you happy living on that amount of money? Some people are and some people aren’t.

For those of you that are happy with your proposed budget, you may be ready to retire. Give that budget to your advisor and tell him that you’ve been successfully test driving it for the past 6 months.

For those of you that aren’t happy, change your budget and give it a test drive. Repeat as many times as it takes to find a budget you are happy with. You should be able to happily live on your budget for at least 6 months. If you can’t, it’s not a good budget.

Just because you checked all the boxes and came up with something that looks great on paper doesn’t mean it will actually work for you. Only a proper test drive can give you that answer.

As you can probably see, you shouldn’t wait until the last minute to perform a test drive. If you need to drive your budget for 6 months and you need to go through 2-4 different budgets, it could take you 12 months, 18 months, 24 months, maybe even longer, to find what works for you.

Of course, some time spent on up-front research can really lessen the amount of time you spend on a test drive. For example, your electric bill is variable, the amount you owe changes from month to month. Call your electric utility and find out the amount of your average monthly bill. Do the same with water, refuse, cell phone service, and other variable expenses. Your credit card company may be able to categorize your spending and tell you how much you normally spend on groceries, fuel, and other expenses. Up front research isn’t difficult or time consuming.

If you know you’ll want to replace vehicles every X number of years, build out that precise vehicle online and see how much it cost. Every manufacturer has a tool that will allow you to do this. If you know you want to travel, again, build out the trip online and see how much it will cost you. Build these expenses into your budget.

Once you have a budget you’re happy with, give it to your advisor. He needs to plug it in your financial plan and help you make adjustments to savings rates, investment styles, allocations, and other areas. His goal is to help you figure out how to successfully meet your retirement budget. Be prepared for him to recommend changes. And don’t get upset or bent out of shape when he makes those recommendations. Remember, you’re the one who changed the goal at the last minute, not him.


What happens if you don’t test drive your budget, find out in retirement that you want more money, and then increase the amount of your retirement account withdrawals?

First, what happens is not your advisors fault. You spent years telling him X and now you are unexpectedly changing to Y. So whatever happens is your fault, not his. Second, I can’t guaranty you’ll go broke. You may have enough saved to support a larger budget. What I can say is that as you increase your rate of withdrawal, your likelihood of running out of money increases exponentially. What this means is increasing your rate of withdrawal from 4%/year to 7%/year does not translate into a 3% change in your probability of success. You just increased your rate of withdrawal by 75%! (3%/4% = 75%). Thus you just reduced your probability of success by an enormous percentage.

Unfortunately, many people ignore the warnings. They ignore their advisor’s recommendations & advice. They’ve listened to their advisor for years, but have suddenly gone deaf to everything he has to say. I’ve had meetings with people where the only item we had to discuss is how many more years their accounts may last before they’re broke. That meeting is what can easily happen if you spend more than planned in retirement.


By test driving your retirement budget, you can find out what really will or won’t work for you. You can make key adjustments before retirement, when it’s safe to do so, instead of trying to make those changes during retirement, when it becomes a high risk move.


Sapiat Asset Management is an independent registered investment advisor, specializing in financial planning based, asset management for Gen X Individuals & Families and their Trusts & Businesses. They have helped countless people of all ages successfully steer their way into retirement.

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