For the “baby boom” generation, the question of when to retire is has suddenly become a reality. The reason it is difficult to answer, is each person is unique and has a myriad of motivators that drive life decisions. So, to answer the question:
– you need to understand who you are at this place in time
– what resources are available to you
– how you want to live the remaining years of your life
The following are some guidelines and thoughts you can use to help determine when is the best time to retire for you.
Do you want to retire?
The answer may be no! In a lot of cultures and until relatively recently in human history, retirement is/was unknown. A skilled craftsman would work until physically unable to do so. Then work would transition into training apprentices or younger members of the family. Essentially, you worked until you died. The same for merchants, scholars, doctors, farmers, etc. Work was what you did and it helped to define your life.
Many people today still want to work and don’t want to retire. The thought of giving up the daily routine of doing something they enjoy really depresses them. What the question should be is, “how can I continue to be productive and continue to live a full life”?
For these people, retirement is really a shift of the type of work they are doing, and/or shifting to fewer hours and pursuing other types of work. A good example is a nurse who is worn out with the physical demands of the profession, but still loves patient interaction and being of service. “Retirement” could mean moving into teaching or just limiting the hours worked from 40 down to 20. An attorney still enjoys practicing law, but shifts to more pro bono (free) work in areas that allow him to “give back” to the community.
How you want to live the rest of your life?
The first question that needs to be answered is what kind of lifestyle do you want to have? This can range from just puttering around the house to travel around the world.
You need to figure out what your year will look like.
Home paid for or are you going to have to rent? What will utilities cost, what is your food budget? Is movie night a weekly cost? What about dinner out? Season baseball tickets a must along with the winter cruise part of your annual expenditures?
Talley how much your expected annual costs amount to. Then add at least 15% for unexpected expenses. Now you have a good idea of what your annual living costs will be.
Then add your sources of income. Pensions, social security, annuities, interest from savings, dividends, etc.
If your expenses exceed your income, then you have several choices. Reduce your expected expenses – cruise every other year, pass on season tickets, downsize to reduce rents and utilities. Or, work longer and save more.
If your income exceeds your expenses, then, congratulations, you are a candidate for retirement.
Now comes the decision. If married, this will be a joint decision. If yes, then start the process. Just getting all your paperwork in order will take some time. Also, visit with your tax and/or financial advisors. They will have information to help you through the process.
You will have to understand there will be an adjustment period. No matter how much you think you are ready for the change, daily routines are powerful influences on us. There will be an adjustment period. Be expecting it. Then, start enjoying the rest of your life!
Health Care and Retirement
One reason many people do not retire early has been the cost of health care. Most needed to work until 65 to continue their employer’s healthcare coverage. Cost for an individual policy for a person over 50 starts to become very expensive, if you can qualify for coverage. The new Healthcare Reform legislation (Obama Care), becoming effective in 2014 will have an impact for those who want to retire earlier. As of January 2014, all health insurance carriers will have to offer coverage to everyone to age 65 (Medicare takes over then) without pre-existing limitations. The price will also be more reasonable. This will allow many more people to consider early retirement. If health insurance can be managed out of reduced cash flow, then retiring from “work” to pursue your “dream work”, can become a reality. If early retirement is something you are interested in, think about consulting with your financial advisor about the new options available at start of 2014.