The Big Retirement Question

I’ve been honored with a lot of praise and congratulations over the past couple of months about my “retirement” (and not a little skepticism about my understanding of the term) — but in quiet moments, there’s been one question that keeps coming up.

That question — and it generally arises once topics like “what are your plans,” “are you going to move,” and “can your wife really stand having you around all the time” have been broached — is, quite simply, “how do you know when it’s time to retire?”

Honestly, it’s a complicated question, and one to which the answer is deeply, even intimately, personal.  For many it’s not their choice, of course. Surveys suggest that for significant minorities the timing is imposed on them by external factors; a job layoff, a physical impediment, or perhaps caretaking responsibilities. While none of those were factors in my decision, at the outset, it’s worth bearing in mind that the “when” is not always in your control.

For most people — including THIS person — the calendar plays a role. Sixty-five is one of those milestone markers to which folks (and plan documents) still “anchor” — I say “still” because full retirement age under Social Security for today’s retirees is no longer 65. You don’t actually have to be retired in order to claim Social Security — but as I eyed that decision point, I had Social Security’s marker in mind. The reality is that there remains a certain age range in which thoughts of retirement can be considered “normal.”

Regardless of age (or Social Security) considerations, a big focus of my retirement timing was about finances. More specifically, first knowing how much our monthly living costs (and that knowledge is a lot more accurate closer to actual retirement than it would have been 30 years ago). That said, it remains something of a moving target, what with surging gas prices, and the reemergence of inflation. We tend to live within the bounds of a known paycheck, one that often (though not always) makes an effort to keep pace with such things. As one contemplates the uncertain “certainties” of a more-or-less “fixed” income — well, when you’re looking out over a financial future that is likely to be twenty years — or more — even the most prescient crystal ball gets a little fuzzy.      

All that starts with a baseline, of course, and thanks to my wife’s spreadsheeting and budgeting skills, it was pretty easy to extrapolate what our baseline expenses would be once work-related expenses (including things like 401(k) contributions) were behind us, including a cushion of sorts for the travel we have in mind, and some “new” considerations for things like healthcare.[i]    

With that financial floor established, we then had “only” to see what regular sources of income[ii] we had to meet those expenses. In that regard, we were fortunate — able to structure regular streams of retirement income that exceeded our baseline expenses while still preserving the larger pools of retirement savings that we had set aside over our working careers for things beyond that baseline out into a distant future. 

At that point we had dealt with what for many is the big obstacle — knowing that we could afford to walk away from that regular paycheck, and that we could maintain our current lifestyle. Now, that wasn’t the first time we had run through those estimates — doing so had already helped us establish savings goals over the years — but the calendar provided a specific focus with regard to timing.

And then COVID hit. 

That turned out to be a mixed blessing. For all the awful, scary things that came with the pandemic, it gave me and my wife of (then) 35 years an extended period of time together in close quarters. Our nest was empty, but for two four-legged children — and it affirmed not only our relationship, but the comfort of knowing that I could be not only content, but happy being at home. Make no mistake, if there’s one big regret that one hears retirees express, it’s that they weren’t ready for the shift to a home focus (not to mention their spouses). COVID provided me with a real-world preview of that experience — and even with the interruptions of incessant Zoom and Teams calls (or perhaps because of them?) — I could tell I was … ready.

So, how do you know when it’s time to retire? Well, for my money (literally), you need to have the interest — the motivation — to seek less of the “what you have to do” so that you have more time for the things you want to do. That needn’t be age-related, of course — but life’s ongoing obligations sometimes require a deferral of the latter in the interests of the former. 

To that point you also need to have the money figured out — because the things you want to do may not put food on your table or a roof over your head. That said, you might find that you can live more simply, or live elsewhere — and enjoy life more with…less. It’s easy to get caught up in the pace of work and life — and to push off for another time the opportunity to “smell the roses” — all the more so if you love and enjoy your work.     

Finally, it’s really important to have the right mindset to be ready to step outside the confines of a W-2 employment structure — that you have people or interests or hobbies that can (continue to) provide meaning, fulfillment, and joy in this next chapter of life.

It’s still early days for me in this new chapter — and I’ll concede that by most outward appearances I haven’t retired at all. Trust me, like any new “job” there’s a learning curve. And I’m working on it.

- Nevin E. Adams, JD

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[i] We didn’t appreciate it initially, but to date Medicare planning has proven to be the most stressful because, while the coverage is surprisingly good, premiums are income-based — and Medicare starts with the last official income number it has — your 1040 AGI…FROM TWO YEARS AGO. Perhaps needless to say (except to Medicare), my post-retirement income is less than it was two years ago — but, fortunately, we were successful in making our case on that point.

[ii] I (finally) consolidated my 401(k)s. I’m happy to say that the depositing of those savings has gotten a LOT more efficient over the years. However, I’m disappointed to say that getting those funds OUT is about as tedious as it has always been (one of the reasons I had put off consolidation) — and EVERYONE, it seems still insists on doing so via a hardcopy check that has to get to you via the U.S. mail (though you CAN pay a ridiculous premium to expedite that delivery) — UNLESS you’re rolling it over to an IRA on their platform. Gee, I wonder why… 

Conversation "Starters"

 This weekend is, of course, Father’s Day—but my dad’s decision to retire was driven more by time than timing. 

Like many of his generation, once he got to 65, it was time to “retire.” He didn’t have a pension (fortunately for him, my mother did), though he had Social Security, and savings in a 403(b) plan that he contributed to later in life—reluctantly—once he saw Mom’s modest savings in her 403(b) account grow.  

My dad was a man of (very) few words—at least spoken words. Conversations with him generally required… effort. Oh, he’d respond to direct questions, but his answers tended to be short and—well, direct. Again, like many of his generation, mostly he was content to let my mother be the conversationalist in family settings.   

So, when Dad turned to me one weekend afternoon for some input on his retirement planning—well, I was surprised. Not that it didn’t warrant a discussion, mind you—but it was not something we had ever discussed—and more’s the pity. That said, I dived into the financials, played through some spreadsheet projections, and—at the end of what I hoped was an educational and enlightening discussion of his options and trade-offs, their upsides and potential downsides—when I was sure that I had been able to unwind and demystify the maze and presented him with a straightforward presentation of alternatives, there was this long pause—and then, he turned to me and, as politely as he could, said, “I just want to know how much money I’ll have to live on every month.”

That, of course, was also the mindset of many in my dad’s generation—not how much we’ll need, but how much we’ll actually have. Ultimately, of course—certainly at the brink of retirement, that’s the reality of living in retirement. 

Now, the 32^nd annual Retirement Confidence Survey, published by the Employee Benefit Research Institute (EBRI) and Greenwald Research, finds that nearly three quarters (73%) of American workers feel confident in their ability to live comfortably in retirement—indeed, 28% feel very confident (though nearly 6 in 10 say that preparing for retirement makes them feel stressed). While that assessment predated the recent market tumult (and there has been some correlation between the markets and retirement confidence over the years), much less the sustained inflation “bite,”[i] Americans’ confidence in retirement has proven to be pretty resilient—and this despite the persistent finding that many haven’t taken the time to do even a single estimate of their projected needs[ii]—and, at least traditionally, that included measures as unscientific as “guessing.”

Now, as it turned out, my analysis of my dad’s situation (stripped of all the fancy “upside potential” possibilities) affirmed his retirement decision—or at least it didn’t put him off it. I’ve wondered from time to time since what he would have done if it hadn’t. My guess is that, like many Americans confronted with those same realities, he’d have “adjusted.” To this day, I feel really lucky that he didn’t have to (if mostly because my mom’s planning compensated for his lack thereof). 

If it’s a conversation you haven’t (yet) had with your parents—or kids—perhaps it’s time you did.

- Nevin E. Adams, JD

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[i] Though, a third of workers and half of retirees who feel less confident cite inflation and the cost of living as the reason for their declining retirement confidence. 

[ii] However, and while it’s far from optimal, the most recent RCS did find that more than half (58 percent) ages 55 or older have tried to calculate how much money they will need to have saved so that they can live comfortably in retirement.