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Deciding When to Retire

The choice of when to retire is multifaceted – comprised of many decisions and calculations.   Many factors influence this choice and should be considered, including an individual’s  emotional and financial well-being as well as their health.

Are you ready to retire emotionally?  How will you spend this time? This is a bigger consideration than most people take into account.  One day, you are a vital part of a business, performing important job functions with people who actively seek your advice and counsel.  You retire, wake up the next day, and suddenly, you have time to fill, fewer deadlines and demands.   How will you adjust? Will you feel unproductive? People who enter retirement successfully often handle this transition by making valuable contributions of time to a favorite charity, getting more involved in community or church activities, or teaching.  Pre-retirees often look forward to fewer demands, less stress and the slower schedule that retirement promises.  They imagine having more time with family and traveling, but it is also important to think about what a daily routine might look like and plan for that as well.

You might consider a phased retirement program. Once you’ve reached 62 years of age, some employers have begun offering access to some or all of their pension benefits while continuing to work part-time for the same company.  These programs are appealing to many baby boomers.  Phased retirement can benefit both prospective retirees, who can enjoy a more flexible work schedule and a smoother transition into full retirement; and employers, who are able to retain an experienced worker.  Employers aren’t required to offer a phased retirement program, but if yours does, it’s worth considering.

Are you healthy?  Today, we can expect to live much longer than our parents.  A woman, who is 65, will live to 85.4 years of age, on average, and a man who is 65 can now expect to live 82.8 years.  Consider how many people you may know who live healthy, productive lives beyond these ages let alone, those who have reached 100 years of age.  This used to be very uncommon and today, most of us know someone who has reached this milestone. This means that we need to have much more money set aside for retirement.  It is not uncommon to spend 30 years in retirement and you will want to be prepared.  Additionally if you enjoy good health, your retirement years may be very active.

Are you financially ready for this new phase?  A general rule of thumb is that you should have 8-10X your ending salary in retirement savings to increase the odds you won’t outlive it in 25 to 30 years.  Of course, individual circumstances vary widely, so you will want to review your own situation carefully and consult a trusted advisor. 

 It is important to consider a budget for this time in your life. What are your sources of income?

·         Do you have a pension?

·         How much have you put aside in retirement savings?

·         When will you collect Social Security?  This can be an important financial decision as benefits increase substantially between age 62 when you are able to begin collecting and age and 70. 

·         Be sure to consider tax penalties if you tap into tax deferred savings accounts prior to age 59 ½.

·         Don’t forget about inflation in your calculations. At the historical average of 3%, in 23 years, your purchasing power will be half what it is today – retirement income will need to increase each year just to cover expenses.

What will your monthly expenses be?   A second general rule is that you will require 80 – 85% of your ending salary to live on.   In addition to ensuring that you can continue to meet your monthly obligations, some other considerations are:

·         What type of health insurance will you have?  Once you retire and your company no longer pays a substantial portion of your health insurance, it is likely you will pay a greater amount of these expenses.  Keep in mind that eligibility for Medicare begins at age 65.  It is a good idea to contact Medicare 3 months before your 65th birthday.  And many people get a Medicare Supplement plan to defray some of their health costs.

·         Have you set aside money for doing the extra things you’d like to do?

·         Will you want to make provisions for any type of legacy giving?


The sooner you start to plan the timing of your retirement, the more time you’ll have to make adjustments that can help ensure those years are everything you hope for.  If you’ve already made some assumptions or choices, you may need to revisit them, especially if you’re considering taking retirement in stages.  And as you move into retirement, you’ll want to monitor your retirement income plan to ensure that your initial assumptions are still valid, that new laws and regulations haven’t affected your situation, and that your savings and investments are performing as you need them to.

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