PersonalFinance: The retirement process

WASHINGTON (Reuters) - Many workers and financial companies talk about retirement as if it's a day on which everything changes. The day you retire is the day you need X amount in the bank, an annuity, a Social Security check and an old person's portfolio, they suggest. It's the day you're done: with work, with commuting, with consuming and more.

But that's far from the truth. For most people, retirement isn't a day, it's a process. You may lose a job and spent time seeking a second one before realizing you just got retired, involuntarily. Or you may leave a 9-to-5 government job and keep tinkering with an eBay business or other hobby. You may stop working one day, but wait several years before collecting Social Security benefits.

For most of us -- the lucky ones -- retirement will be long, not short. Most people retire before the Social Security "full retirement" age of 66, according to the AARP. And life expectancy keeps going up: If you're 60 today, you stand a 50/50 chance of living longer than 21 years if you're a man, and 24 if you're a woman.

That has a lot of implications for the way you save and manage your money before, during, and after that transitional period. Here are some thoughts about the day you retire.

-- On the day you retire, you should still have money invested for the long term. For example, T. Rowe Price's Retirement 2010 Fund, designed for folks retiring this year, has 44 percent of its portfolio invested in domestic stocks, 11 percent in international stock, 35 percent in bonds, and only 10 percent in short-term income investments, like money market funds. Moving all of your money out of stocks and into bonds and bank accounts is an overly cautious approach that increases the likelihood that you won't be able to afford your lifestyle as long as you'd like.

-- On the day that you retire, you're still looking ahead at major purchases as well as everyday expenses. You can expect to have to pay for at least 21,900 meals, 240 months of electric, phone and cable service and 20 years of property taxes, homeowners insurance or rent. But not all of your expenses will be handled with a fixed monthly draw from your investments. You'll probably buy a couple of cars after you retire, and spend 20 holiday seasons buying gifts for your friends and family. Maybe you'll want to take a celebratory trip. Oh, and leaky roofs and broken washing machines respect no man's (or woman's) retirement. That means you should have some money coming to you automatically every month for regular bills, but you should also have separate funds set aside for bigger, incidental expenses.

-- On the day that you retire, you may not want to be collecting Social Security. For every year that you defer starting your Social Security benefits (Until you hit age 70), your monthly benefit will grow by 8 percent. If you have substantial savings in 401(k) plans, IRAs and other accounts, you may want to live off of your savings for a while and skip the Social Security checks. Especially if you are under the age of 66 and want to continue working in some capacity. That's because if you're younger than "full retirement age" (currently 66), you can lose benefits when you earn income. There may also be tax advantages for starting to take money out of tax-advantaged accounts earlier.

-- On the day that you retire, you should be more worried about today's health care than the long-term care you may need down the road. If you retire before the Medicare-eligible age of 65, you may have to line up your own health insurance. With guaranteed coverage for pre-existing conditions not phasing in until 2014, that could be hard. Keep your company plan in force (through COBRA coverage) until you line up your next plan.

-- On the day that you retire, you'll want to spend a lot of money. You'll want to run out and buy closet organizers and airline tickets and hobby supplies like paint brushes or power tools. You'll want to buy new athletic clothes and loungewear. Golf clubs or skis. The first year of "retirement" is often the most expensive, experts say. So, prepare a separate first-year fund so you can invest in the kind of retirement you want.

-- On the day you retire, you should sleep in. You've earned it.

(editing by Gunna Dickson)