How do you really know you’re ready to retire? You’ve been saving diligently in your 401k plan, you met with your pension plan representative, your mortgage is paid for, and financially it seems like all systems are go. But how do you really know if everything will work out?
I’ve had many clients ask me this over the years and, while there may not be a simple answer, here are a few things to think about before you pull the trigger. Please note that most of them don’t have anything to do with money!
What will a normal day look like?The office had your retirement party.The balloons are all deflated and the cake has been eaten.You’ve now been retired for 3 months.It’s Monday morning and you wake up at 6:00 – not because your alarm went off, but because that’s what time you’ve gotten up your whole life.You lay there in bed, listening carefully to…nothing.It’s totally quiet.The question is: “what will you do” that day to fill up the time.What about the rest of the week/month/year?Be honest with yourself.Try to envision not only one day’s worth of activity, but things that you really would want to do every day for the rest of your life.Some people have no problem answering, but if you do, then maybe you should reconsider whether you are ready to retire or not.
Do you get a lot of personal satisfaction out of your work?Do you get up every morning looking forward to going to work? Do you have a team of people at work with whom you enjoy interacting or perhaps that you enjoy managing?If the answer is yes, you should really think about whether to retire or not.Is there an option for you to gradually scale back your hours or tasks and “ease” into retirement rather than jumping in “cold turkey”?
Are there any financial incentives/disincentives for retiring?For example, some federal employees get a financial “differential” between their pension and their pension + social security if they retire before age 62.Others, like some school teachers, get an extra stipend to cover health care costs until they are Medicare eligible.These might “sweeten the pot” enough to make retiring financially viable.On the other hand, especially if you are going to receive a pension, is there an incentive to wait one more year for a substantially larger pension payout?If the pension calculation is based on something like your highest 3 or highest 5 years, then staying on a while longer might have a significant impact on your pension.
Are you living in the right place?Do you have family and friends close by with whom you will want to spend time in retirement, or are they all a long distance away?Relocating right as you retire can be very stressful, but it can also be a great financial benefit if you move to a state with lower taxes and housing costs.It can also help make retirement enjoyable if you move to be closer to friends and family.You might also decide that you have too much house and want to downsize, or you might want to try “split living” – having a home in the warm part of the country for winter and another for the summer (or is that just something people here in the north woods do?)
These are just some of the other things to think about, so if you want to discuss retirement, don’t forget to include the “intangibles”. As always, if we can help, feel free to reach out at firstname.lastname@example.org.