Wealth managers weigh the pros and cons of a summertime retirement 'trial run'

Summer retirement, the client had a blast. Summer retirement, will the fun – and money - last?

Advisors say there are pros and cons to starting one’s retirement during the summer. Work schedules, for example, are often less stringent in the summer months, possibly allowing for a more gradual phase out of the normal day-to-day activities of employment. The time may also allow for exploration into new avocations that can be scheduled into retirement. Furthermore, a long vacation may provide time to reflect on what a schedule without full-time employment would entail.

All those things sound fantastic. However, wealth managers say there are other items worth considering if the plan is to ride a summer vacation into a permanent one.

Kelly Wright, director of financial planning at Verdence Capital Advisors, points out that not only is when one retires important, but where one plans on spending retirement matters a lot as well. 

“Not only are income tax rates salient, so is how much income is taxed at that rate. Some states do not tax certain retirement income and some reduce deductions based on Adjusted Gross Income. A state income tax proforma comparing your current state and your retirement destination state is a very useful tool,” Wright said, adding that clients should also look at the cost of living, property taxes, and insurance before building a dream vacation home.

Meanwhile, Robert Alimena, partner & private wealth advisor at Procyon, says one of the biggest challenges, especially early in retirement, is discovering one’s new routine, as well as the true cost of living for the lifestyle one desires. In his view, retiring as summer approaches and having a busy schedule right out of the gate provides a good litmus test of one’s desire to live an active lifestyle. Moreover, it may also serve as a trial budget run.

“If you live exactly how you want for the first few months, can you maintain that spending rate successfully on an annual basis throughout retirement? On the flip side, if you live more lavishly during your summer travel, but don’t expect to maintain that run rate year-round, it may take an extra few months to really settle in and smooth out those annual spending expectations,” Alimena said.

For those considering relocating to their favorite vacation spot, Alimena highly recommends taking an extended holiday and renting a house in the area one where may want to move. In order to really figure out if this new location is the right retirement destination, it is prudent to live there under “normal” conditions, according to Alimena.

“By taking an extended vacation and renting a house or condo, you will typically not be packing every day with visiting the areas’ attractions, you will have some down days to just relax and walk around town. You will likely not dine out every night, and will grocery shop and cook meals at the house. This will give a better perspective on how much you truly enjoy the area, but also give a better approximation of what it costs to live in the area under normal conditions,” Alimena said.

Finally, Mike Duffy, financial advisor at Bogart Wealth, says that taking an extended summer vacation functions as an excellent trial run for retirement because it forces a person to practice the actual rhythm of retired life. For example, managing unscheduled time, being away from your primary and work community for a prolonged period, and spending time 24/7 with your spouse. 

“One of the most important jobs as an advisor is to visually demonstrate that funding major lifestyle goals, like meaningful summer travel and vacations, can coexist with a structured long-term retirement plan and legacy planning. We accomplish this by using historical data, optimization strategies, cash flow and tax modeling to reassure clients of their long-term financial security while enjoying their wealth,” Duffy said. 

When it comes to asset allocation, he says an effective approach is to separate the portfolio into distinct “buckets.” By that he means clearly earmarking specific assets for living expenses and lifestyle goals, while leaving a dedicated growth bucket for heirs and legacy planning. 

“This approach reframes spending not as a depletion of their life savings, but as the intentional execution of a structured plan. Ultimately, it helps clients realize that creating lasting memories with family right now is just as important a piece of their legacy as the wealth they leave behind,” Duffy said.