When should you retire?

I hear all versions of opinions on retiring—it ranges from “as early as possible” to “never”. While this is primarily directed to people who can afford to consider it, that is definitely not the case with everyone. So first, some factors in deciding whether you can afford it at all:

  1. Do you have enough guaranteed income to cover (at least) your fixed expenses? If you have good Social Security and a pension (that endangered species), you probably can afford it, especially if there’s a cost-of-living increase as part of your pension. You lucky duck.
  2. Do you have an investment portfolio sufficiently large to make up any shortfall? You can take a quick look and see if a 4% (or, stretching it, 5%) withdrawal will cover the rest of what you need. But also think carefully about what changes you may need to make. What if the market dropped by 1/3? Could you tighten your belt enough or put off discretionary expenses to cope with a lower withdrawal?
  3. Could you work part-time, as a consultant, or start a business with low start-up costs? This can work well for healthy, youngish retireds, but it’s not really feasible for older retireds who may begin to experience health issues. If the extra income is gravy, great, but if it’s essential any illness is going to be catastrophic.


Okay, you can afford it. Now, should you?

  1. How old are you? The younger you are, the longer your money will have to last, and the more certain it is that you’ll experience more market crashes. You’ll need either more money or a slower withdrawal rate.
  2. What will you do about medical insurance? If your employer has paid at least some of your insurance, you might be shocked at the actual cost of individual insurance (previously self-employed, not so much). Currently, you can’t get Medicare until 65, so check out insurance costs before you announce retirement. Even once you’re on Medicare, you’ll still have to pay for insurance for prescriptions and supplementary, and long term care insurance if you won’t be able to cover around $100,000 a year (in today’s dollars).
  3. Are you irreplaceable? The answer to that is probably no, no matter what you think. Sure, you may be the best producer, the best manager, the most skilled…but if a truck ran you over, they’d find somebody else. Exceptions may be medical personnel in rural areas and small towns, some politicians and leaders, and anyone who provides a unique or hard to obtain service, skill, or product, especially solo. Ok, I’ll concede that you might be the best at what you do, but the world will go on. Check your ego!
  4. Do you know what you’ll do with yourself? If your whole life or your identity has always been your job, you need some soul searching. Everyone needs a meaning in life, but at any age you can find new meaning, or hobbies, or learn something you never had time for, or friends…it’s very sad when someone retires and can’t stand it. It’s a failure of imagination and dimension, and a sure sign you need to grow your soul.
  5. Do you have any social outlets? Many people miss the social group built in to some workplaces. Truth is, all your friends are getting older, too, and even if you stay past your expiration date, they’ll probably be moving on. Find some interest group you can be part of, even if online.
  6. Is it time to give somebody else a chance? If your employees and coworker have any idea you’re working past retirement, they are almost certainly muttering about you—when is she ever going to leave? Doesn’t he have anything better to do? And they’ve almost certainly considered that they won’t move up while you’re still blocking the ladder. The best will leave for better opportunities. Don’t think upper management hasn’t thought of this. Not only do they not want to lose the best, they’ve also probably calculated that they could hire someone cheaper than you. You’re only one knee replacement away from them figuring out a way to ease you out. Maybe it’s time to go out on your own volition, in dignity and glory. If you’re all that indispensable, they’ll call you back as a consultant, but don’t bank on it.
  7. Just how old are you? Many people are healthy and sharp in their 70s. Some are, in their 80s. Some are Warren Buffett. But after 80, continuing to work really requires a Plan B: fewer days, fewer hours, fewer clients, more support for mundane tasks. Really, don’t you have anything else to do?