When to Retire: It’s Not Just about the Money

Deciding when to retire is one of the biggest decisions you will make in a lifetime.  Most of us are waiting to reach a certain age or to achieve a specified financial goal but there is much more to consider.  Retirement readiness isn’t just about finances it is also about being prepared emotionally.  With so many variables at play, there is no one-size-fits-all when it comes to the right time to retire and it must be examined by each individual according to your unique situation.   

My husband and I started talking about retirement in our late fifties.  Mentally, we both felt ready.  He had been working long hours for many years and was feeling burned out.  I was a bit less wary of working in general but was no longer finding fulfillment in my current workplace. So it was time to focus on the financial aspect.  We decided to first define our very specific priorities then put pencil to paper (which was actually a spreadsheet) and pull the numbers together using a basic income-to-expense model for each year. Although impossible to predict every situation having a general guideline was beneficial and this along with our financial planner was instrumental in the decision process. After all considerations, what it ultimately came down to for us was time versus money.  Did we continue to work full time and save more but with less time to enjoy it? We were relatively young for retirement and we undoubtedly could have worked longer for some additional security.  But in the end, we chose our time as we felt our objectives for retirement would be best achieved at a younger age.  So we retired with a little less savings while still able to live a comfortable life.  Retirement is a leap of faith and while some things have worked as expected, others required a change of course along the way.

As with most things in life you have to modify as you go in order to achieve the best path forward.  

Feel you may be ready to retire?  Ask yourself these 5 questions:

Do I have enough saved?

Being prepared financially is the primary focus for those considering retirement. As you get within about 10 years you should start to have a fairly good estimation of expected future income and expenses.  It’s always a good idea to have as much debt paid down as possible although some retirees in their mid 60s and beyond will still carry a mortgage. Once you have a handle on your income from social security and pensions you can determine how much will be needed from a 401k or other savings to cover your anticipated living expenses including unspecified costs such as healthcare, inflation, and taxes.  A financial planner is beneficial in helping evaluate your portfolio and make certain the time is right to take the plunge into retirement.

Am I prepared to live on less income?

Most experts agree that to live comfortably your retirement income should be at about 70-80% of what you were earning pre-retirement.  We know that many expenses will naturally decrease after retirement including transportation, clothing, housing etc. But it could also be the case that you will need to alter your discretionary spending.  This could mean a decrease in monthly costs such as eating out or maybe less travel and luxury items. If you are accustomed to designer purses and numerous spa visits each month you may need to examine their importance to your happiness.

What are my goals in retirement?

Ask yourself how you hope to spend your days in a less demanding life.  Do you desire a quiet, simple life after so many years of being in the rat race?  Maybe you will write that novel you have always planned on. Take long walks and connect with nature, spend more time with the grandkids. Or perhaps you are looking to pursue a more active lifestyle. If you hope to travel, play golf, or participate in other activities and adventures which can be more costly you should consider this in assessing your financial readiness. Also, keep in mind that our goals will most likely change as we age.  A younger retiree’s activities will taper off over the years leading to a more sedate lifestyle.

How will I be defined without my job?

Some do not even have retirement on their radar because they love what they do and want to keep doing it as long as possible.  Others desire the freedom, yet their identities are so defined by their careers that they can’t imagine what their life would be without it.  We live in a world of labels and if you have previously been defined by your profession, such as doctor, accountant, or boss and these titles no longer apply it can leave you feeling unsure of your own identity.  Have a plan for what you want your life to look like post-retirement and your specific role in that life. Maybe you will now be artist, author, gardener, or vacation planner.  Lady of Leisure also has a nice ring to it.

What will bring me fulfillment?

After a lifetime of obligations, whether it be a career or care giving, retirement is the time to make it all about you.  It’s time to nourish yourself on the inside.  Part-time work or volunteering may bring fulfillment.  Many find it in family, sharing their home for holidays, or taking care of grandkids. There are many paths leading to your wholeness so find your happy place and make it your life.  You have worked hard for it.