When is the Best Time to Retire?
There's lots of things to consider, whether it be your age, your income, how much you have saved for retirement, your family life. All these different things and factors will play into the decision in regards to when the best time to retire might be for you. But the hard part about rules of thumb is that they aren't unique or specific to you. Welcome to Retirement Answers, a podcast built to answer your most pressing retirement questions. If you're someone who's either thinking about retirement or already in retirement, well, you're in the right place.
Jacob:Hey there. My name is Jacob Duke, each week, I'll be walking through different tips and strategies to help you succeed in retirement. So let's go ahead and get started with today's show. Hey, friends, and welcome back to another episode of Retirement Answers. As always, my name is Jacob Duke.
Jacob:I am the host here of the Retirement Answers podcast. Thank you so much for tuning in. If you are a new listener, welcome. Glad to have you. I hope that you find today's episode valuable, as you're on your retirement journey or beginning to think about your plan for retirement.
Jacob:And if you are a frequent listener, thank you so much for being here yet again. As always, if you're finding the show valuable, please leave a rating and review there on Apple Podcasts or Spotify. You'd be shocked at how much that helps other people find the show. So I would appreciate it if you did that if you are enjoying the show. So today we're talking about a question that I get fairly often and it's Jacob, when is the best time to retire?
Jacob:And there's no perfect answer here, but I wanna give you five or six. I might have a bonus for you, but I wanna give you five different thoughts or ideas around how you can determine the best time to retire for you. Now, there's lots of rules of thumb out there. There's lots of things to consider, whether it be your age, your income, how much you have saved for retirement, your family life, all these different things and factors will play into the decision in regards to when you decide to retire or when the best time to retire might be for you. But we don't wanna necessarily always operate by rules of thumb.
Jacob:We wanna say, yes, these things are applicable. We have to pay attention the numbers, we've gotta pay attention to the data, we've gotta understand all these different ideas, but the hard part about rules of thumb is that they aren't unique or specific to you. We have to take those, funnel them through our lens, funnel them through our framework and say, based on my situation, that particular concept or principle maybe doesn't apply to the effect as it might apply to someone else. So we need to consider all of those things, but we don't need to make our decisions solely on these different retirement rules of thumb. So we're going walk through these five or six different considerations that I think you should know or think about whenever you're trying to determine, hey, when is the best time to retire for me?
Jacob:Now, we jump into that, I wanted to highlight this week's Listener Review and it comes in from david1466. He gives the show five stars and says, Jacob Duke is a perfect example of a meaningful advice in the financial world. His content is cut to the chase, straight to the point, distilling the most important concepts you need to know on your journey towards financial independence. As a longtime boggle head, AKA follower or admirer of Jack Bogle and the founder of Vanguard, I've come to appreciate the knack for explaining nuanced financial ideas in a pragmatic and immediately useful way. Do you want to increase your financial IQ?
Jacob:Listen to all the episodes of Retirement Answers podcast and check out his YouTube channel as well. Well, thank you, David fourteen sixty six for that kind review, and I know exactly who this person is because he and I communicate often. He's an avid listener and I really appreciate his feedback, but also just tuning in each week. So if you're finding the show valuable, just like David, you can go and leave a review there on Apple Podcasts. That helps me know that I'm doing a good job, but also allows other people to see your thoughts about how I'm doing so that they can come listen as well.
Jacob:All right, so let's go ahead and jump in so we can answer the question of when is the best time to retire? The first concept or thing that I think we've got to evaluate is, are we mentally ready? And what I mean by mentally ready is two separate ideas. Number one is, are we mentally ready to not work anymore? Meaning we're gonna leave our job, our career, whatever we've done for the last however many years, are we ready to leave that and leave that wherever it is, meaning we're not gonna touch it again?
Jacob:A lot of us have control issues or ownership issues in regards to our jobs, we're scared that someone after us might not handle it as well as we would like to. So that's a common fear. So the mentality there is, well, I just have to stay because who knows what position the company or the organization is gonna be in if I leave. So that's the first thing is, are you mentally ready to hang it up, to stop working, to say, I'm done, I'm not gonna do this anymore. But then also the second part of this is, are you mentally ready to be in this new phase of life where you perhaps have more time on your hands and less things to do throughout the day?
Jacob:And maybe retirement will be a relief for you in that regard. Maybe you're looking forward to not having anything to do. But I think that a lot of people struggle with this idea of having nothing to do because they feel like they have a purpose whenever they're accomplishing or pursuing something or moving towards something rather than just kind of aimlessly wandering through life. So the first thing we've got to do here is we've got to focus on are we ready to stop working? We've got to mentally get to that place of I'm ready to give that up, hand it over to someone else and be done.
Jacob:And maybe your career has been hard, and it's like, man, I'm ready for that to happen. And now on the flip side of that, whenever you actually get into retirement, you have to have this mindset of I might have more time, less important things to do, so how am I gonna fill my time and am I okay with having extra time? Or am I gonna feel like I'm worthless and not accomplishing anything? It's really a personality thing at this point. So we wanna be mentally ready for retirement on both sides, leaving work, but then also entering a new phase of life where it can be hard for many.
Jacob:So that's the first one, how mentally prepared are you for this next phase of life? The second one is, are you trying to retire at a reasonable age? Over the last few years, we've heard more and more about this early retirement thing, and it can be very good for a lot of people. But the hard part is, is what happens if you retire too early? Meaning you retire at age 50, but then what are you going to do for the next forty years of your life?
Jacob:Or will your money last that long? Or what are you gonna do for healthcare between now and 65 once you get to Medicare age? Or how are you gonna fund your life if you can't pull money out of your retirement accounts because that'll be penalized? All of these different things kind of play into the age in which you retire. Now, 65 is what we'll call the average retirement age, but I think that number is going down farther every year on average.
Jacob:More people are retiring early, but the hard part of that is a couple things. We've gotta make sure we have a purpose or things that we're going to do in these years, but then also on the financial side of things, we've gotta make sure we've got money to fund our life both now, now that we have an extra four to five years of retirement built into our plan, but also not run into longevity risk depending on how long we live. Now, the other side of retiring early is retiring too late. Many people feel like they just simply don't have enough money saved. And so they end up working forever or they never end up retiring completely because of this fear of outliving their money.
Jacob:So they keep pushing this thing that they wanna do called retirement. They wanna keep pushing that down the road and never give up work because of this fear. So I think the answer in terms of what age do I retire at, it lies somewhere in the middle of those two things. Maybe it's not retiring too early, but it's also not retiring too late. And again, this is gonna be a personal preference.
Jacob:It's unique to your situation. It's not gonna be a rule of thumb of, hey, at 62 or retire at 65 or retire at 67. It's gonna be individualized based on your situation and what you're walking through. So that's the second consideration. Are you trying to retire at a reasonable age?
Jacob:The third thing that we need to think about whenever we're trying to figure out, hey, when should I retire is something that I've alluded to already and I also alluded to in other episodes is what are you gonna be doing in retirement? You know, what's your goal? What are you gonna do every day? What's your structure to your day look like? Who are you doing these things with?
Jacob:Are you relocating, are you moving to a different state, are you trying to be closer to family, like what are the things that you're trying to do, because that's gonna set the direction of every day throughout the rest of your life, is you gotta have this, what I call a purpose, you've gotta have an idea of what you're trying to do and what you're trying to accomplish. Because if you're aimlessly walking through this thing called retirement, you're gonna end up not liking it. So number three is you have to know what you're wanting to do in retirement and when you're gonna do these things. Maybe use the early stages of retirement to do all of your travel, whenever you have the energy or the health to go and do it, but also you have the financial resources to do so. So planning out your years, planning out the stages of retirement, understanding what you can and can't do in different stages, I think becomes a important part in deciding when to retire.
Jacob:If your health seems to be going down for one reason or another, maybe it's time to think about retirement, right? Because if your job is overwhelming and you're spending all of your time doing that, then you're going to end up retiring one day and not be able to enjoy it because your health is at a spot where you're not able to anymore because you work too long. That goes back to point number two. So think about what you wanna do in retirement and when you're gonna do it, and that will help determine the best time to retire for you. The fourth consideration is do you have a plan?
Jacob:Now, what I mean by a plan is not so much a Monte Carlo simulation that you plugged into a website online. What I mean by a plan is you need to consider all these different things. You've got to consider, you know, social security timing. How much is my portfolio worth? How much income can be produced off that portfolio?
Jacob:What should my investment allocations be? How do I lower my taxes? Do I have an estate plan in place so that my heirs are not left with a mess? All these things have to be considered and that's why we call it a plan. We're planning for the future.
Jacob:But what I think a lot of people get wrong maybe in their idea around having a plan for retirement is, is we're always planning for the things that we think will happen. We're always planning for the good scenarios or the happy thoughts whenever we're thinking about retirement. But what people miss a lot of times is what's our plan for when things don't go according to plan? What's our plan for our investment portfolio whenever the market goes down 20% in a year and then 40% in two and a half years? What are we going do?
Jacob:What does our plan say to do in that situation? Does that mean cut back on spending? Does that mean change our investments? Does that mean invest more in a certain thing? Like what does it look like?
Jacob:And do we have a plan for that? So a plan goes far beyond just a simple Monte Carlo simulation where you're trying to get it to say 100%. Those things are helpful, absolutely, but there's more to it than that. There's more situational analysis that's gonna have to take place year after year. So what I'd argue in this situation is, yes, you need a plan, but you need more than a plan.
Jacob:I believe that you need a system that you can operate by and go by every month, every quarter, every year throughout your retirement to say, if XYZ thing happens, then I have a plan for that situation. Or if this good thing happens, how do I have a plan to enjoy or benefit from that good thing? So we need to have a plan, yes, but we need to have a system to operate by because we have no idea what the future holds. So the only guarantee is that our plan will be wrong. That's the only thing we know about retirement.
Jacob:And so our plan is less about being right on all of these things and more about building in flexibility and optionality into your retirement and say, I know it's not gonna go perfect, but I need to have my options or flexibility in place for whenever the bad things do come up. So that's the fourth step is we have to have a plan and I'd argue you probably need more than a plan, you need a system. Now, fifth one here is kind of funny and it's really interesting because the question I ask most people who I talk with about their retirement is, what's your biggest fear around retirement? And I get most of the time, some of the answers are gonna be, hey, I'm scared of running out of money. But sometimes I get this answer of, I'm really worried and scared if he or she being someone's spouse, I'm really scared if they are gonna be able to put up with me all day.
Jacob:Right? And this is a big concern for a lot of people if you think about it. Whether one spouse has been staying home with kids or raising a family, or maybe both spouses have been working. Regardless, it's been a really long time for these two people that they've not spent every hour of the day together. And so that can be a hard transition for all parties involved whenever you go from being away from each other nine to ten hours a day, and then it changes to I'm home with you all day, we're going to do everything together.
Jacob:Can we put up with each other all day, every day for the rest of our lives? That's a big concern for a lot of people. And honestly, it's a fear for some. And so it's kind of funny to think about, you know, is your spouse ready to be with you all the time? But it's a reality.
Jacob:And so that's something maybe that needs to be discussed and kind of figured out and say, hey, look, I'm gonna be gone for four hours every day because that's just good for everyone. It's good for our relationship, whatever that comes out to be. But think about that and don't avoid that conversation. Don't say I will figure it out because a lot of relationships get strained in those early years of retirement simply because they're not used to being together all the time and that's okay. So have a plan for it, have an idea of what that will look like, how do we make sure we, do that well together as a couple and talk about it.
Jacob:So that's the fifth one, you know, is your spouse ready to be with you all day and what's the plan for doing that really well? And the sixth thought I have for you here today is I think that you're gonna know when it's the right time. You know, if you're really uneasy about retirement, it might not be the right time, but don't just write it off yet because it might just be, hey, it's different. You'll know when it's the right time because your job has been taxing for the last twenty years. You'll know it's the right time whenever you start to have grandkids and you wanna spend time with them or go visit them.
Jacob:You know that it's the right time whenever your health starts declining and you wanna use your health while you have the time to go enjoy it. Like all these things start to pile up and you're like, I just think that this is the right move for me because who knows how long we have to live. I wanna spend it with the people I wanna be with and I wanna go do the things I've always dreamed of doing. And so I think that we all have this innate ability to know when the right time is. And there's always going be fear there.
Jacob:There's always going be a little bit of anxiety around doing something completely different than what you've done your whole life. So don't write it off because of fear. Just know that you've got to dig into that a little bit deeper and say, what is the fear rooted in? And so I think that most people will know when the right time is to retire based on what their plan is moving forward. Do we have the financial wherewithal to make all these things happen?
Jacob:What's our plan financially, but also our plan non financially. But I think that trusting your gut in a lot of this stuff is important as well. Don't just say, hey, I'm gonna do it because that's what I should do. And that's what all the experts say, you gotta retire at 62. It's, well, am I even ready to retire at that point?
Jacob:Do I enjoy what I'm doing? Do I have really good health? Am I able to sustain that moving forward? Or am I hating my job and is my health deteriorating because of my job? Perhaps evaluate retiring.
Jacob:So use the rule of thumbs, use the ideas that are thrown at you from all of these experts, but you have to apply it to your situation and consider these six things that I mentioned, you know, are you mentally ready? Are you of a reasonable retirement age? What are you gonna do throughout your retirement? Do you have a plan or a system for your financial side of things in retirement? What are you gonna do when things don't go well?
Jacob:And then finally, I think you're just gonna know whenever it's the right time. So those are some different ideas or thoughts around answering the question of when is the best time to retire? There's no perfect answer. Everybody has a unique situation and the answer is gonna be different for each person. But hopefully these different ideas will help you kind of navigate those waters and kind of decide that for yourself.
Jacob:Because like I said, there's no one size fits all for these things. If you'd like to talk about that for your situation, reach out to me. My email is gonna be down in the description below, as well as a link to my calendar schedule and intro call. I help people just like you all the time navigate retirement, build their plan, create their system for their retirement years, and then help them execute that successfully throughout the rest of their life. So if that's interesting to you, if you'd like to learn more about how I work with my clients, feel free to reach out to me, schedule an intro call, and I'd be more than happy to do that.
Jacob:Other than that, I hope you have a great week, and I look forward to talking with you again next week. Hey, it's Jacob again, and I wanted to extend a quick offer to you. If you have a question and you would like to have it answered here on the show, please email me at jacobretirementanswers dot net. And I'd love to answer that question for you right here on the show. Also, wanted to remind you that nothing discussed in today's episode is meant to be financial, legal or tax advice.
Jacob:Retirement Answers is for educational purposes only. Thanks for tuning into this week's episode. I look forward to talking with you again next week.
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