I was at a gathering last week when a friend came up and asked, “When can I retire?”. That question gets at the heart of this blog and I would re-phrase it as, “When can I retire with bad retirement surprises minimized?” Only you can answer the ‘when’ question for you.
Last week I saw a picture of Stephen Hawking which made me think about deriving a complex formula which would tell us when we can retire. Good news-bad news here – I did not find a formula, but I did work out a checklist that can help you know your readiness to set a retirement ‘when’ date. Even with the checklist, the only person who can answer the ‘when’ question is you (and your spouse/partner if you have one).
Maybe when do you retire you’ll start cooking Dutch baby pancakes in cast iron!
The ‘When’ Checklist
Walk through the checklist with me, please:
____Financial – I have a realistic retirement budget (spending plan) and know my expenses (needs v. wants). I have a retirement income plan in place that will support my budget and, ideally, is resilient to stock market, bond market, and inflation changes. I am comfortable with my retirement savings and my emergency fund. (Running out of money would be a really bad retirement surprise.)
____Medical – I have a retirement medical expense plan that takes into account pre-65 and Medicare (65 and on) medical expenses, including insurance premiums, copays, deductibles, and prescription costs. My medical expense plan is realistic based on my current health and my personal assessment of my health over the next 5-10 years.
____Housing – I have a plan for housing for early retirement, for when I slow down, and for when I need assistance. I have enough certainty in my (our, if with spouse/partner) housing that I know I won’t worry about my home.
____Family – My spouse/partner and family are supportive of my retirement decisions. (Many people are fortunate enough to have family and having their support for retirement will make it easier and more pleasant. Conversely, if your spouse/partner or family does not approve, your retirement happiness will be at risk, a potential bad surprise.)
____Work – I have considered my work, my colleagues and customers, and my workplace and have decided that I can retire. I will miss my usual work, colleagues, workplace, and customers, but it is time.
____Motivation – I have considered the freedoms and constraints of retirement and weighed them against the benefits and constraints of staying in the workforce. I am motivated positively toward retirement. Even a long vacation would not remove my motivation to retire and leave my job.
____Social – I have a plan for retirement social connections which will replace enough of my workplace interactions that I will be socially fulfilled in retirement as I was in my work.
____Mental/Physical – I have a retirement activity plan that will keep me mentally and physically stimulated to the degree I desire.
Not everyone gets to choose.
Plansponsor notes, “a study from Prudential finds 51% of retirees retired earlier than planned. Among those, only 23% retired earlier than planned because they either had enough money to retire, wanted to retire, or were tired of working. Forty-six percent of those who retired earlier than expected did so due to health problems, 30% were laid off from their jobs or offered an early retirement incentive package, and 11% left work to take care of a loved one.” The study found that half of the ‘earlier than planned’ retirees retired five or more years before they thought they would.
Using the checklist above and having your planning tools, the RIP, RAP, and budget, completed will leave you in the best position you can be if the choice of your ‘when’ is dictated by an external event.
Actions you can take include:
-Complete the ‘when’ check list (with your spouse/partner if you have one). Think about when your ‘when’ date might be.
-If you find you’re not ready to seriously consider ‘when’ dates yet, make note of why. If the items that need more preparedness are plannable, like the RIP or RAP, work on planning. Some items, like readiness to leave work and colleagues/customers may just require more time.
And if you have not seen the “Why you should read this blog…WIIFY” post, it’s here.
Questions, comments, or suggestions for retirement surprise areas you want to know more about?
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