When should you retire? Today, tomorrow, never? The answer is both emotional and financial. The financial side of retirement is easy – you either have enough money to retire, or you don’t. If you have more than enough money to cover your expenses, you can retire at any time regardless of your age. The math, for some people, does not help determine when to retire because they like to work or feel the need to continue working long after they’ve amassed a significant retirement nest egg.
I worked with a client who gave his employer his notice to retire. He worked for his company for several years, and he was one of their key executives, so he had to give them at least two months’ notice before leaving. We went through the financial planning process to make sure he could afford to retire. We ran several scenarios, and all of them returned the same result; he could afford to retire. His assets were more than sufficient to meet his needs. His challenge was not financial but emotional. Once he came to grips with the financial side, he was ready to accept the emotional side. He called me on the day he gave his notice, and he sounded happy and relieved to move on to the next chapter of his life.
The emotional side of retirement is more difficult to factor into the retirement equation. Walking away from a career you’ve held for 20, 30, or 40 years isn’t easy. You have to put yourself into a position to retire emotionally.
- What will you do in retirement?
- Where will you live?
- How will you spend your time?
- Will you volunteer?
- Do you want to travel the world?
- Will you learn a new skill?
- Will you golf? Fish? Hike? Bike? Camp?
These are essential questions, and you’ll need to answer them before you transition into retirement.
Moving from work to retirement is like jumping over a 6-inch, 100-mile-deep crevasse. One hundred miles is a long way to fall, but you know you can make the 6-inch leap to the other side. I’ve worked with several people who’ve made the leap from work to retirement, and all of them made it to the other side. I have yet to have one of these individuals return to work because they’re not enjoying retirement. The clients who have retired say they are busier and happier than ever and wish they’d have done it sooner.
Are you ready?
The company gave me an aptitude test, and I found out the work I was best suited for was retirement. ~ Unknown
April 13, 2021
Bill Parrott, CFP®, is the President and CEO of Parrott Wealth Management in Austin, Texas. Parrott Wealth Management is a fee-only, fiduciary, registered investment advisor firm. Our goal is to remove complexity, confusion, and worry from the investment and financial planning process so our clients can pursue a life of purpose. Our firm does not have an asset or fee minimum, and we work with anybody who needs financial help regardless of age, income, or asset level. PWM’s custodian is TD Ameritrade, and our annual fee starts at .5% of your assets and drops depending on the level of your assets.
Note: Investments are not guaranteed and do involve risk. Your returns may differ from those posted in this blog. PWM is not a tax advisor, nor do we give tax advice. Please consult your tax advisor for items that are specific to your situation. Options involve risk and aren’t suitable for every investor.