The decision to retire can be difficult for many people and there are a number of important issues that must be considered. Probably the most important is your partner. Are they ready for you to retire? Do not assume and do not take your partner’s thoughts for granted.
I retired at the end of December 2016 at age 57. For almost 35 years I worked in public accounting as a CPA and for the last 24 years I was a business partner in a local firm. We grew the firm from 15 people to 37 and a group of us were involved in constructing our own office building in 2012.
There were two fundamental questions that needed answering in order for me to retire. I believe these are the same questions all potential retirees face and I expect the process of arriving at the answers can vary from person to person.
Was I Mentally Ready for Retirement?
This answer came quite easy to me. I was tired. The volume of work and my level of client service reached a point where I knew it was time for me to retire. My clients were an “A” group that was built carefully over many years. They were a pleasure to deal with; however, I was getting wore out. I also believed there was more to life than working and I wanted to spend good quality years in retirement.
There were people who doubted my ability to retire. It was not that they did not believe in me – they just felt that I would not have enough to do away from my work. From my perspective, I believed that if I put the same energy into retirement as I did in work then all would be good. Eleven months in, so far so good!
I have had people tell me that they continue to work because they enjoy it or because they don’t believe they have enough other interests to fill their day. I have no judgement on other people’s decisions. For me, it seems there must be more out there to explore and enjoy without having to use work as the reason for my existence. I took the leap and do not intend to look back.
Do We Have the Financial Resources to Retire?
This question is placed second because, if your mind is not ready, you can have all the money you want and that will not prepare you for retirement. Of course, even if this is the second question, it is still important to ensure you believe you have enough resources to retire. In fact, it carries great importance because this is a joint financial decision with your partner, whereas, the mental decision is yours alone.
Remember that you want to carry on a lifestyle that you have become accustomed to and not have to worry about making money your focus in retirement. Plan well in advance!
The financial aspects of retirement do not happen overnight. They come with years of planning and the support of qualified investment advisors. It is very important to identify a good investment advisor to lean on as you ready yourself for retirement.
It was over three years before retiring when I got serious about projecting our resources that would be available for retirement. The income projection was important; however, the projected spending in retirement was even more important. As I always told my clients, each person’s retirement is different based on their lifestyle requirements. Some people can retire on very modest incomes, whereas, other people need a lot of income because their lifestyle requirements are very high.
I think it is a fallacy to assume that you will reduce your spending in retirement. Some expenses will go down and others will go up. Expect business clothes and office entertainment to go down while travel expenses will likely go up. Get a handle on what you spend. It will surprise you where the money goes.
When you go to your investment advisor to assist you with a retirement plan, you will need a detailed understanding of your expected spending amounts or your retirement plan may be misleading. You will also be wise to build in a contingency for unexpected expenses. Do not take this exercise lightly. Take the proper amount of time to do this right as it is necessary to get good results.
I did the whole spending exercise myself as well as the income projections from our retirement savings. I then took the information to our investment advisor for confirmation. We had no pension fund and we depend on the variety of investments we made over the years. Just a note – these investments accumulated and grew the most in the last working years. The early working years were used to pay down the house mortgage and provide for our two children. We were building equity in our house and business in the early years; however, it was in the last ten years that the investments significantly materialized. This may be different for people with an annual pension plan.
In the end if you can answer “yes” to these two fundamental questions, and if your partner is on board with your retirement, then retirement may work for you. So far I’m happy with the journey!
My second cup is now empty……….