Why You Should Plan Your Retirement Schedule

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California state worker Curtis Walker looks over retirement plan brochures at the Calpers regional office in Sacramento
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California state worker Curtis Walker looks over retirement plan brochures at the Calpers regional office in Sacramento, California October 21, 2009. REUTERS/Max Whittaker

Many people dream of a retirement that goes something like this: Quit your job, sit back, relax and do nothing all day. But be careful what you wish for, because having this dream come true could be disastrous to your retirement. Here's why entering retirement with no plans could backfire:

Your health deteriorates quickly if you just sit around. I haven't retired yet, but I can already speak from experience here. After a few years of working at home I became overweight. I mentally slowed down quite a bit as well, and I'm young. I was fortunate to be able to see the trend about a year ago and put a stop to it by exercising much more and adding more variety to my work and social activities, but I'm not sure if I could reverse the trend if I was retired and much older. If you sit around watching TV for a few months your health and fitness level will deteriorate significantly.

Knowing what you will do makes your expense projections more accurate. There's no better way to plan for retirement than to have a solid understanding of how much you'll need to spend. Knowing more about your daily routine will make the projections much more dependable. With your newfound free time you might start up an expensive hobby, volunteer or find a part-time paying job, all of which will impact how much you spend in retirement.

Having retirement plans makes the transition easier. It's a good idea to research hobbies and get started before you quit, because you often don't know how much everything will cost until you dive right in. Or you might want to start building relationships in order to start a volunteer or paying position as soon as you retire. The more time you spend preparing, the smoother the transition will be.

Take the time to test drive your retirement plans. It's fun to think about retirement activities you might enjoy. Testing out these activities before you actually retire will give you more certainty about whether or not they are a good fit for your tastes and budget.

Minimizing taxes requires advance planning. A variety of factors including whether you'll have earned income in retirement, when you begin drawing Social Security and what types of retirement and investment accounts you draw money from will affect how much tax you will pay in retirement. There are a variety of tax strategies retirees can use to minimize their tax liability, but almost all of them require research and planning.

You'll be happier. Developing a retirement plan could allow you to better control your expenses, reduce your tax bill and could even reduce your retirement anxiety by making the transition a little easier. A sudden retirement can be a disorienting experience, and nothing but relaxation can get boring after a few months. Setting up a variety of activities will give you a reason to be excited about retirement.

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