How do I know when to retire? (part 2)

Posted on December 28, 2015

Part 2: Three reasons to retire as soon as possible

How do you decide when to retire? In part one of this topic, we saw that the more important question is not, “When can I retire?”, but, “When is the best time for me to retire?”  We reviewed three reasons why you might want to delay retirement past the time when many of your coworkers have left the workforce.

On the other hand, some people make the mistake of not retiring soon enough. They are scared about having enough money and keep working longer than they need to, missing out on the freedom they could be enjoying in retirement.

Retirement May Not Be As Expensive As You Think
You may not need to save up as much money as you think before you can retire. Here’s why.When you retire . . .

  1. You won’t need to save for retirement any more.
  2. Your taxes might be reduced due to less income, and some of that income may come from tax-free investments, such as Roth accounts or municipal bonds. Plus, any capital gains income may be taxed at a lower rate, and not all your Social Security income is taxable.
  3. You may no longer need as much insurance. Disability income insurance and life insurance designed to replace your income if you are unable to work is no longer necessary.
  4. Work-related expenses, such as business clothing, professional memberships, and extra gas for the car, will go away.
  5. By reducing your earned income so it’s under $15,720 (in 2016), you can receive Social Security retirement benefits starting at age 62 without any earnings limit reduction.1
  6. You don’t have to stop working completely. You can continue to work part time while enjoying freedom from the commitments of a full time job.

This doesn’t mean everyone should retire as soon as possible – but it may be possible to retire sooner than you think!

1 https://www.socialsecurity.gov/OACT/COLA/rtea.html

Here are three reasons you might want to retire sooner rather than later:

Reasons to retire as soon as possible

  1. FINANCES: Because retirement may not be as expensive as you think. When you analyze your saving goals for retirement, work with a Certified Financial PlannerTM professional. Ask them to help you set a realistic goal for retirement that takes into account the specifics of your situation – including all probable reductions to your income needs. (See the sidebar for examples of possible reductions.)
  2. FULFILLMENT: Because you may want more time to pursue fulfilling activities outside of work. If you find fulfillment in hobbies, travel, volunteering, or pursuing other activities outside of work, why spend most of your time in the office? It’s time to enjoy what you love.
  3. RELATIONSHIPS: Because you may want to devote more time to relationships outside of work. Freedom from commitments at work mean you can spend more time with those you love. Enjoy the treasure of your children, grandchildren, friends – and even your spouse!

A friend of mine named Anne made me promise that when I talk with people about when to retire, I’d tell her story. When her husband Hans was approaching the age of 62, he had the option to retire.  Financially they could afford it, but he wondered if it would be better to continue working.  He and Anne talked about it together, and then decided.  Hans retired the day after his 62nd birthday.

Hans and Anne did a lot of travelling together, especially enjoying their visits to his homeland of Estonia. They both got more involved in volunteering in their church and their community, and Hans enjoyed singing in the local men’s chorus.  They thoroughly enjoyed each other’s company and continued to fall more deeply in love over the years.

At the age of 74 Hans was diagnosed with cancer. Four months later he died.

What Anne wants me to share is this: Don’t put off spending time with the people you love and doing the things you love just because you think you’re “supposed” to keep working.  The years Hans and Anne spent together in retirement were some of the best years of their lives.  If Hans had kept working at age 62, they would have missed out on some very special moments together.

So how do you decide when to retire? It all depends on what’s most important to you.  Where and how do you find your greatest sense of fulfillment?  What relationships mean the most to you?  Once you have a clear answer to these questions, making a decision about when to retire comes easy.

For help identifying your values and applying them to your retirement planning decisions, contact one of our Certified Financial Planner™ professionals at Pension Consultants at 800-234-9584.

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PCI’s archived blog entries are dated, the rules and statutes referenced may have changed. The analysis or guidance within these blog entries may have become stale, dated, or no longer accurate. PCI will not update or change these entries to reflect the latest analysis or development.

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