Practice makes perfect when it comes to retirement

T. Rowe Price's Christine Fahlund puts theories to test.

Christine Fahlund, a senior financial planner and vice president at T. Rowe Price Group Inc., is an innovative thinker and researcher who has spent years trying to prepare Americans for retirement both financially and emotionally. On June 2, she’ll put her theories to the test as she retires after 17 years with the mutual fund company.

A few years ago, Ms. Fahlund coined the term “practice retirement,” which she defines as the process of winding down work and increasing leisure time as a way to ease into the next phase of life.

Financial advisers could take a few tips from both her research and her personal journey as they help clients transition into retirement. As members of a graying profession, some advisers may even find her advice useful as they contemplate their own next chapter.

For many aging baby boomers who are behind in their retirement savings, Ms. Fahlund found that working a few more years could substantially boost their nest eggs. But stashing more money into a 401(k) plan isn’t the reason. She crunched the numbers and discovered that increased savings during the final years of work don’t make a big difference.

The real value of working longer — even one, two or three years more — is delaying the drawdown of those savings. In the meantime, the account balances can continue to grow, salary and health insurance coverage remain in force, and Social Security benefits can be postponed until they’re worth more later.

THE SELL

“But how do you entice people to keep working when they don’t want to?” Ms. Fahlund said in a recent interview. “Urge them to start playing sooner,” she said in answer to her own question. “Tell them to delay the retirement date but not the gratification.”

In fact, she said, clients can even divert some of their usual retirement savings allotment (after capturing any employer matching contribution) to fund their fun during their final years of work.

“The big message to advisers is, you have this amazing opportunity to take a negative message and turn it into a positive one,” she said. “Instead of saying to clients, ‘You’ve done it all wrong,’ or, ‘You didn’t start saving soon enough,’ or, ‘You have to keep working,’ you can say instead, ‘Let’s start focusing on your retirement now. What’s on your bucket list? What are your dreams?’”

A firm believer in practicing retirement, Ms. Fahlund spoke on the eve of a two-week vacation to South Africa with her husband, Greg. Upon her return, she described the experience as the trip of a lifetime, complete with a visit to the spectacular Victoria Falls.

Ironically, our follow-up conversation occurred during a daylong symposium on whether Americans are prepared for retirement. For eight hours straight, panel after panel of economists from various persuasions debated the validity of different databanks and interpretations of the results. Against such an esoteric backdrop, I was struck by how consistently practical and applicable Ms. Fahlund’s advice has been throughout the years and how I will miss her sage advice.

“I don’t think I could have made this transition without trying retirement on for size mentally and emotionally over the past few years,” she said. “But the final decision happened so fast that it surprised me.”

The trigger? Losing a close friend last year who died suddenly at 48 just before Christmas.

PRECIOUS TIME

“Life is too short,” Ms. Fahlund mused. “She didn’t get a chance to live a long life. I’ve been given that gift and I should take full advantage of it.”

It seems that even retirees have biological clocks that tell them it’s time.

Ms. Fahlund practices what she preaches. When she turned 66, she said, she filed a restricted claim for spousal benefits only and plans to switch to her own maximum Social Security retirement benefit when she turns 70 this summer.

Rather than merely retiring “from” a career, it’s important to think about what you’re retiring “to,” Ms. Fahlund said. You need to plan for this new phase of life that will entail a different pace, goals, pleasures and challenges.

Alluding to the glide path of target date retirement funds, which Ms. Fahlund has promoted for years, I joked that she should look beyond “to” and think about what she will do “through” retirement. As one of the best financial planners I know, she no doubt will.