What do the numbers 61, 65 and 73 have in common? You might guess they are the home run records set during various Major League Baseball seasons by Roger Maris (1961), Mark McGwire (1999) and Barry Bonds (2001) respectively. However, for our purposes here those numbers represent peoples ages. Specifically, the age they may be looking at to mark the beginning of their retirement. In fact, we could also put in numbers like 55, 50 or even younger as even people at those ages are asking could I or should I retire early.
Let’s just get this out of the way right at the beginning…clearly a person can retire at any age they choose. However, to receive full financial benefits from the Social Security Agency will require a person to work until a certain age (based on when they were born). For example, I was born after 1960, so full retirement age for me isn’t until age 67 according to the Social Security website.
I could begin to receive benefits as early as age 62. However, those benefits would come to me at a reduced rate. The calculation used by Social Security is based on the number of months once I retire until full retirement age is reached. In my case that would be 60 months if I retired at age 62.
Retiring early at age 62 sounds great. However, it would really cost me. It would turn a potential $1,000 benefit into only $700, a 30% reduction. $300 dollars a month would go a long way. The Social Security website has a great chart showing all the ages and reduction percentages.
So the choice to retire early isn’t a no brainer. In fact, there are many other things to account for aside from the financial considerations.
Should I Retire Early Questions to Consider
With all that in mind, when asking the question, “Should I retire early?” here are some questions to consider – three in each category related to career, finances and lifestyle.
Career Related Questions
1. Do I still enjoy my job?
Our lives are defined so much by the career we choose and using that career to work for a money to supply our daily needs. It’s one of the biggest places outside of family where we find purpose. In many ways it helps identify who we are and links us to a place in society.
It’s also one of our main resources for connecting with people.
If the job brings you pleasure, it may be wise to not give it up so quickly. Retirement could become a big negative as you struggle to find purpose and relationships outside of a career.
2. Am I still emotionally invested in my job and bringing considerable value to the organization?
Could you love a job but not be emotionally invested in it anymore? Absolutely.
Could you love your job but not really be contributing high levels of value to your organization? Again, absolutely.
Our attention gets redirected all the time. For many aging through midlife, that may mean things like grandchildren or travel. Perhaps charity work or supporting causes becomes appealing.
Maybe your company is going through a transition and the changes will require more effort than you are willing to give. Those changes may require you to adapt and change work style, routines or even get further training. That may not sound to appealing.
These could be signs that, while you love your job, the emotional energy for it simply doesn’t exist anymore and it’s time to move on.
3. Can I still physically do my job?
Some jobs are very strenuous on the body. However, let’s face it – no matter what the job, the older we get the more our bodies break down. This can obviously affect our work performance and thus our perceived value to the company.
If we are missing days routinely due to illness or physical discomfort, it may be time to step aside.
Personal Finance Related Questions
4. What financial obligations do I still have?
It would be real challenging to retire when still facing heavy financial obligations. Even more so when others are depending on your financial support. If children are still relying on you to pay for college or you are financing an elderly parent’s nursing home care, those could be obligations making it difficult to step away from your job.
Of course the big area of focus related to this question is whether or not you are debt free. Do you still have a mortgage, car payments or school loans to repay?
In addition, are there outstanding medical bills or credit cards with large balances? All these could financial obligations that are hindrances to retirement.
5. How much have I saved in cash and investments?
The question to ask here is “Based on what I have accumulated thus far, could I withstand a dramatic drop in my investments and still be OK?” You may ask “What’s dramatic?” I’d say 50-60%. Would you be fine (i.e. could you get by financially) if your investments lost that much of their value in a stock market downturn? (Note: I used the 50-60% drop in investments because that’s approximately how much value the Dow Jones Industrial Average lost from October of 2007 to March of 2009 in the market’s last financial crisis.)
The longer we continue to work and contribute to our investments, the better chance we have of accumulating enough resources to live comfortably in our retirement years. Some more years of saving and investing may push you into a more comfortable financial position.
6. Are the benefits too much to give up?
Your work may be offering some great benefits. Health insurance…employer match on the 401(k) retirement fund…stock options…company car…potential for advancement (yes…people in their 60s get promoted).
Consider the boost keeping these benefits for another five or ten years could do to your financial bottom line.
Lifestyle Related Questions
7. What will be my standard of living in retirement?
This is probably the biggest lifestyle question you need to consider. What do you want your standard of living to be during retirement? Will you downsize? Eat out more? Cruise the world? Become involved in expensive hobbies?
Considering how you want to spend your retirement years will go a long way in determining how much money you will need and thus, when you might be able to retire. Retirement calculators like the ones found here (Dave Ramsey) and here (Vanguard) can be a great resource to help you sort out the answer to this question.
8. Will I be moving towards something?
This goes back to whether or not you love and are still emotionally connected with your job. Many people simply get burnt out on work and quit without giving consideration to what they will be moving towards. Life on the couch in retirement watching television all the time doesn’t sound appealing to me. Yet that’s where many people end up because they haven’t considered what to do in the next stage of their life.
It may be time to retire if there is something hot on the burner that you just can’t wait to start. If not, working several more years may provide time to contemplate what you will do in a future that doesn’t involve punching the clock.
9. Does my significant other agree it’s time?
For couples, retirement should be a joint decision. I would consult with my wife about this issue and seek her counsel.
If she didn’t agree it was time and was uneasy about it, I would have a hard time going against that. The tension and daily uneasiness that would most likely result from spouses disagreeing about this issue could be very disruptive to the relationship.
Should I Retire Early?
As I stated at the beginning of this post, the choice to retire early is a personal issue. There is no problem with people retiring at any age.
The key is to give it serious thought before making a decision. Start now, no matter what your life circumstance. Weigh the pros and the cons of retiring at different ages. Most importantly, be willing to make adjustments along the way. We don’t know what life holds in the future and plans made now may look very different 10 or 20 years down the road.
There are so many factors to consider. Use this as a starting point to answer the should I retire early or not question and start piecing together your retirement puzzle.
Questions for Discussion: Based on your current projections, when do you plan to retire? What are you looking forward to in retirement? What scares you the most about retirement? Do you think your lifestyle will change in retirement?