Sisters Talking On…When to retire

Point for Discussion:

“When Should I Retire?”  This is a question that many boomers are asking themselves as they consider their life situation (e.g., still working, kids or grandkids at home, desire to travel) and their financial situation (can we afford it?).   What makes the most sense for one may not make sense for someone else.  It’s one of the big decisions we think about our whole lives.

Points of View:

(Laurie)

Those who are planning to retire at some point want to be sure that they can afford to do it.  The key here is planning and working toward a date/year.  While we can’t control for everything, we can plan for the basic necessities.  Chances are, you’ll have to be more thrifty, but for us, it’s been worth it.

Like many of you fellow boomers, we, too, have worked long hours for many years, and have been planning to retire for decades.  We didn’t always think we could do it, but we did everything we could to at least have the potential to retire.  Now, we are about 2 years into retirement (yeah!), and we have learned quite a bit that we want to share, if it helps you!

  • Save something from every pay check, no matter how small. When you get a bonus, or have extra income, save the bulk of it. And when you can, increase how much you save from each check.  It’s hard to save, but it’s necessary!
  • If you have a 401K or Roth account, contribute an increasing percentage each year (e.g., if 5% the first year, 6% the second, and so on). It’s less painful that way.
  • Check to see if your first or second job (way back when) had a pension.  Many companies did back in the 80’s, but we were young, just getting started, and may not have known about it :-).
  • When you are within 2-3 years of your planned retirement date, if you can, save 25-33% of your income (or this percent of one partner’s income while the other pays most of the bills), this accumulates toward your retirement fund quicker than you think.
  • Estimate all of your expenses, especially healthcare (it will be more than you are paying now, and will increase every year). Remember groceries, eating out, utilities and other basics.
  • Put your plan in motion and stick to it. If your kids, or others, need your help financially, put your retirement fund first, then offer help with other dollars.  It’s the right thing to do.
  • In terms of investments, be conservative – it’s better to gain less and not lose, especially given market volatility. It’s hard to plan if you are at risk of losing part of your retirement fund.  While bigger gains are nice, the capital gains tax takes quite a bit, so earning a little less, costs you less!
  • Be disciplined. It will be worth it when you reach your retirement date!

(Lynn)

Well, I agree with Laurie that finances are key to making retirement possible.  Everyone has an opinion about how much money you’ll need to make your retirement comfortable.  But like anything else, what works for one, may not work for you.  If you have the luxury of being able to save as Laurie suggests, you should have no problem with comfort in retirement. You should be able to purchase what you need and even withstand some setbacks.

It would certainly be easier to retire if your mortgage is paid off and your monthly expenses decline.  In an inflationary environment, it can still be challenging to determine exactly how much you’ll need to have the lifestyle you want in retirement.

I see retirement as a reward for many years of working hard, raising children and occasionally sacrificing a few things in order to get to retirement sooner.  Our parents generally looked at retiring after working for 30 to 40 years.  In the old days, many large corporations offered defined benefit pension plans for long-term employees which assured that there would be incoming cash in retirement, though less than when working.  If the mortgage is paid off, this generally works pretty well.  These days, most corporations are leaving the retirement saving to us through deferred tax 401(k) accounts.  Many companies contribute small amounts into these accounts as well and since we can’t access these funds, without penalty, before we hit 59 ½ years old, we can save quite a bit.

But money isn’t everything.  I know of many people who worked hard and saved diligently, who passed within a year or two of retiring.  For all of their planning, they didn’t have an opportunity to enjoy their golden years. So we also need to consider how long we may live.

Work may be very important to you.  For me, I saw it as who I was.  What I did, was somehow defining of me as a person.  Now that I have retired, I see that work was a means to an end.  My hubby was retired, having fun, while I was working 12 hour days and responding to emails on weekends.  I didn’t realize the amount of stress I was under.  Now that I have retired, it all seems crystal clear.  What was I thinking?!!

I know many people that were workaholics.  Work was all they did.  We used to joke about how they were going to survive retirement without a strict work routine in place.  For many, this isn’t as much of an issue as we thought.  My retired friends and family wonder how they had time to work at all.  They are all so busy now with many things that are a lot more fun than working.

Timing your retirement is not easy.  You want to be healthy enough to enjoy it and have the resources to do those things that you’ve been looking forward to.  My best advice is to start planning early, revising if necessary as you go along.  It’s your plan, not the plan others say you should follow.  Work toward the lifestyle you would like in retirement and make it happen.

Our Question for You

What’s the one most important piece of advice you would give to planning for retirement?

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