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How to know when you can safely retire

A financial expert recommends changing the question -- and when you do, the answer may surprise you.

By Mar 7, 2014 12:07PM

This post comes from Neal Frankle at partner site on MSN MoneyRetiring can be a frightening subject. Where is the income going to come from once you pull the plug? How much will you need? How will you spend your days? These are all important questions you have to address. But what if you don’t have the answers?

Man with calculator © Siri Stafford / Photodisc Red/Getty ImagesThe last thing you want to do is get this wrong. If you retire too soon, you may be forced back to work but find it very hard to land a job. If you retire too late, it can cost you your most precious treasure -- your time. How do you know when it’s time to retire?

The best way to work out your answer is to change the question a little. Instead of asking when it’s time to retire, ask yourself why you can’t right now. As I see it, there are two reasons you might still be punching the clock.

Financial obstacles

The main reason why people hold on to their jobs is because they need the money – or at least they think they do. Of course you might have to work right now -- but are you sure?  In my experience, many people work far longer than they really have to.  Are you one of them?

The only way to really know is to run some financial projections. Don’t worry -- you don’t have to hire a fancy financial planner to do this, you can do this all by yourself.  All you need is a little information:

  • How much do you spend now?
  • How much do you think you’ll spend when you retire?
  • What will be your pension/Social Security income?
  • How much income can you derive from your investments?

Once you have this information you’ll know where you stand.  If the picture isn’t as rosy as you hoped, you can probably take steps to change the equation a bit.  I recently got off the phone with a client who was worried sick about her future.  She was convinced that she’d never have the scratch to retire. But then she had a change of heart.

She realized that if she just sold her home and moved to a lower-cost location, she could basically retire whenever she wanted to -- including right now.  That move would free up capital to create more income, plus it would eliminate the cost of home ownership. True, she’d have to rent. But that would be far less expensive than maintaining a home. In this case, it was a great solution that created a lot of freedom.

So if you want to know if it’s time to retire or not, your first order of business is to gather the information to answer the four questions above. Keep in mind that once you retire your health care might be more expensive so you’ll have to add that back in. Also, you may lose your life insurance. That may not be a big concern because you may not need it at that point. Still, it’s important to address the financial side of retirement with eyes wide open.

Personal obstacles

Even if you can afford to retire, you may not be ready to do so. You may not want to say goodbye to your friends at work or you may not want to give up the hustle and bustle. These are real factors and it’s important to acknowledge where you really stand on the social aspect of employment.

Of course the best solution to these challenges is to get involved with people and activities outside of work. I’ll admit that I’m lousy at this. I love what I do and I work all the time. I honestly have no idea what I’d do if I wasn’t working. When I did my numbers, I realized that this was a far greater obstacle to my retirement than the financial issue. I’m working on it now but it’s not easy.

Bottom line

In order to know when to retire, ask yourself why you aren’t retired already.  Figure out where you stand financially and socially. Both are important. Then, be open-minded about the tweaks you are willing to make in order to make your retirement dream a reality.

Are you ready to retire? Why or why not?

More from

Mar 7, 2014 8:34PM
Retire at some point whether you can financially afford to or not.  The saddest thing I can think of is to work until you die.  It's got to be better to retire poor than to die on the job.
Mar 7, 2014 8:08PM
In an ideal world we would all be able to ask this question. The reality is that nearly 40 percent (!) of current retirees quit working earlier than they had planned. In other words, the decision isn't always up to us.

Mar 7, 2014 8:46PM
Rather then retire all at once start with small steps to see how it feels. In my job I cut back to two days per week. Saturday and Sunday only. Started taking SS five months before full retirement just to put money aside. Worked on days everyone else was off and took off fly fishing and camping when everyone else was working. When winter came started skiing and daily exercising along with reading many books. Volunteered at the local museum four hour every Tuesday. Was it hard to do? Sure. Giving up full time job was scary but now a year later I would only go back to work full time screaming and hollering, love it. As to the future, yes it is starting to feel real comfortable to retire full time. Just give it a little bit at a time. 
Mar 7, 2014 9:54PM
I retired at 52 yrs of age with more than 30 years employment, but be aware of major life adjustments that include reduced spending. If you are able to budget wel,l and lower your spending to match your new income it will work. However,  if you can't control spending retirement will not work. My income was cut in half when I retired and I have designed my life to fit into the lower income. My savings is not used for day to day living but for emergencies. Before anyone retires just try to live on your retirement income for 6 months and see how it works out for you.      
Mar 8, 2014 8:41PM
I knew at young age I would never be rich but I saved, paid into a pension plan for 20 years, and consulted with a financial wizard.  All looked good for a comfortable retirement in 2002 and that's what I did.  Then the big banks and mortgage companies caused the economy to crash and ripped off a chunk of those savings, my house value dropped like an anchor, and my so-called promised pension has been reduced even though it was earned.  I'll never live long enough to totally recover.

My advice is to live in the now because there is no guarantee of a comfortable future as long as crooks get away with cheating the rest of us.

Mar 10, 2014 9:00AM
Sometimes people are forced into retirement when their health declines. I have six friends who are now on disability and they will tell you quickly they wished they were each able to work. They are all barely able to survive and I do see many of them not lasting another five years of their life. They either have lupus, congestive heart failure, has had cancer, osteoarthritis, celiac sprue disease or heart problems. I have two more who are retiring later this year and next year I will be retiring. We are watching people we know dying before they reach 60. I can name 10 already, in the past three to seven years who have each died of cancer in their mid to late fifties already. Those never lived to retire and enjoy it. Some of us Baby Boomers aren't living as long as our parents are. My mom will turn 87 next month and ALL her friends are long gone and she has dementia. One of my friends who is disabled with lupus and congestive heart failure may not out live her mother who is in a nursing home. Her mom has already lost three out of seven children all before age 50. She is 87, also. So retire as soon as you can and enjoy what life you have, for we are never promised tomorrow. 
Mar 7, 2014 10:56PM
Retirement can be great if you have money to pay your every day expenses and friends that make each day worth living.
Mar 7, 2014 8:51PM
Most people start families long before they are financially ready. Retirement pretty much the same, but people still manage it.
Mar 7, 2014 11:04PM
When your company moves to China,and your so called old at 55 .That might tell you  your time has come.But never say die, you could maybe get another job for minimum wage .Your best defense is have the good old green backs .Other wise it a sad World for some. Sorry  Good luck
Mar 10, 2014 10:39AM
You may not want to retire, but  you may want to leave that corporate job and do other things.
Mar 10, 2014 1:41PM
When to retire? As soon as you can. There is nothing wrong about work and I enjoy watching people work all day but I have retired. I first scaled back from my first career and went into a second career at 52. I did that for 9 years and then decided it was time to go. I enjoyed both careers but the hours in the first one and the bureaucracy  in the second one( it was a Govt job) took a toll and I just wanted to stop working. I had written out a plan for expenses before I left my first career and lived on less money while in the 2nd career. I went out and budgeted two budgets- the Dream budget with bells and whistles and then the basics budget. I hit my financial goals to live the Dream budget and decided it was time to go. My only worry is the health care issue of cost and staying healthy but by staying active each day, I worry about the costs more than anything else. I am fully prepared to live off the bare bones budget. I am luckier than most I realize but also have worked some incredible hours to get there and gone without a lot over the years. It is worth the sacrifice because I can not only live a good life but am able to watch my family grow up and am there to help them if needed.
Mar 7, 2014 8:19PM
All too often the golden years turn out to be fool's gold. I'm a 56 year old professional with a graduate degree.  A few years ago I would have told you retirement looked pretty good.  Now it appears I'll end up like my father and grandfather (both college graduates)... working right up until the day they died.  Alas, the American Dream is but a footnote in history.
Mar 7, 2014 8:43PM
The best time to retire is when politician's, wall street moguls and corporate leaders can all agree, they need to start brushing their teeth with preparation H.
Mar 17, 2014 2:53PM

Financial reasons are not the only reason keep working.  Some people really do enjoy their jobs and they do them well.  I know plenty of people that felt they had to retire just because they were of that age even though they still had a lot they could contribute.  They are not the type who want to sit home.  They like to travel some but could do so and still work.  They end up more miserable retiring than if they just kept working.  I don't think people should say you have to retire early and you are nuts if you do not want to. 

Sure if you have a crappy job or just one you hate obviously you want to get out of that and the sooner the better.  But if you love what you do and can still do the work then great.  It may just be considered a "hobby" you get paid for.  Or working part time seems to be the norm.  Just all out retiring when you still have a lot of life left and a lot to offer isn't for everyone.  Sure we know plenty of people who can't wait to retire and if they can afford to do so, then great. 

Oh and to retire poor is better than dying on the job?  Sure, if you do have a terrible job perhaps but who wants to live their last few years worrying about how you are going to live on a fixed income with prices going up all of the time.  I guess this could also be a wake up call that planning early is the best solution.

Mar 10, 2014 8:28PM
I prefer the term "selective involvement" to retirement.
Mar 10, 2014 1:37PM
I see George Soros has another min wage worker on his payroll.  (LarDog)
Mar 8, 2014 3:57AM
 Buy low sell high and die. What a wonderful life.
Mar 10, 2014 1:33PM
Nobody will be able to retire if the Unaffordable Bozo Act isn't repealed.
Mar 10, 2014 12:19PM
in a capitalist society the goal is for you to punch out on your last day of work and die walking to your car in the parking lot
Mar 10, 2014 1:35PM
Everyone under 40 is screwed by the entitlement a-holes in the world. (Dumbocraps)
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