Deciding when to retire isn’t always easy. Most people just base it on their birthday, but there are other factors you should consider as well. In the video below, I’ll give you seven signs that you’re ready to retire.
I’ve worked with many clients over the years who decided to retire early. Sometimes that was a great decision, other times it resulted in some unexpected challenges. Below are some of the pros and cons I’ve seen with early retirement. Consider them carefully as you decide when to retire.
Time control. During your working years, you don’t control large chunks of your day. If you retire early, however, you shed those demands and have much more flexibility and opportunity to use your time to do the things you really want to do.
Health. Generally speaking, the younger you are, the healthier you are. If you retire early, you get to take advantage of the fact that you’re still healthy and active.
Open doors. In The Funny Thing About Time, I discussed how time closes doors as we get older. The kids grow up and move away. You lose a spouse or other loved one. Your physical health changes and you’re not able to do that trip you always wanted to do. Retiring early means that more of those doors are still open.
Better relationships. One of the advantages of having more time is that you can prioritize relationships. During our working years, we’re less proactive with relationships. It’s a side effect of less time and more obligations. Early retirement changes that calculus. And since relationships are key to a happy life, retiring early can be a huge advantage.
Less stress. This one is pretty self-explanatory.
Potential opportunity for a second career or passion project. Some retire early because they are ready to leave work/career behind. Others still want to work, they just want to do something they enjoy or are passionate about without having to worry about what it pays. Retiring early can give you that opportunity.
Age difference with other retirees. I have a client who retired early and moved to a private community in Florida. He was the youngest resident by several decades. You can feel a little out of place if you’re 50 and everyone around you is 70. This is obviously more of an issue if you move to a destination geared toward retirees.
Guilt. I wrote about this in 4 Unexpected Emotions in Retirement. If you retire early, you can sometimes feel guilty because you’re doing fun stuff while your friends and family are still working. This can make conversations awkward as you talk to each other about your day, priorities, etc.
Money. The sooner you retire, the less time you have to save and the longer your nest egg needs to last. If you are considering early retirement, be sure to work with a trusted adviser to create a detailed retirement plan with a high probability of success.
Comparison with peers. Alas, comparison with others continues even in retirement. Your friends and co-workers will likely be a little jealous of your newfound freedom and you’ll likely feel a bit green when you hear about their promotions and raises. You might even second guess your decision to walk away from the challenge and status your career. The best way to guard against this is to do things in retirement that provide purpose and meaning.
Social Security. Your Social Security benefits are based on the assumption that you will continue to work until full retirement age. If you retire sooner, your benefits will be a little lower. Likewise, if you decide to claim your benefits early (rather than waiting until full retirement age) they will be reduced. You can retire early and still wait to claim your benefits, but that means that your portfolio will need to do the heavy lifting until you file (see my point on money above).
Health insurance. If you retire before becoming eligible for Medicare at age 65, you’ll need to get a health care policy that bridges the gap between your employer policy and Medicare.
Timeline vs. Pie Chart
Regardless of when you retire, you’ll be faced with tradeoffs. If you wait, you get more money, but you lose time and health. If you retire early, you sacrifice a bit of money, but you’ll be healthier and have a much longer runway to enjoy retirement. You need to decide what’s most important to you.
One piece of advice I can give you: Don’t save the best for last. Retirement should not be a timeline where youth is 0-20, working years equal 20-65 and retirement is 65 plus. Instead it should be a pie chart divided between time you control and time you don’t. Retirement is using whatever time you control now (whether that’s 10%, 50% or 90%) to live the life that you want to live.
Because retirement is a time filled with fun, travel and leisure it is easy to make the pursuit of pleasure your orienting principle. That would be a terrible mistake. There’s nothing wrong with pleasure, but it must exist in the context of something deeper. Let me explain.
Meaning vs. Pleasure
I’ve written before about Viktor Frankl. He was a psychiatrist and holocaust survivor who wrote the book Man’s Search for Meaning about his time as a concentration camp prisoner. Frankl founded a school of psychology called Logotherapy (literally “meaning” therapy). He believed that striving to find meaning is the primary motivational force in humans. This was in contrast to Freud, who believed that the pursuit of pleasure was the driving motivation.
I’m in Frankl’s camp. In my experience with retirees, those who focus on meaning often have a deep sense of satisfaction, purpose and happiness. Pleasure is a welcome byproduct of their pursuit of purpose. Alternatively, those who can’t find this deeper sense of meaning often self-medicate with pleasure. Pleasure with no greater purpose eventually feels hollow for most people. So how can you orient your retirement around meaning?
How to find meaning
According to Frankl, there are three different ways to find meaning in life. I’ll list those below and then relate them to retirement.
Through projects or work. All of us are designed to do something meaningful and productive. Retirement doesn’t somehow remove that need, it just means that you no longer have to base your choice on how much something pays. Maybe that means working part-time in a field that’s always interested you or volunteering for an organization you’re passionate about. Or maybe it’s running for your local school board or working on a big community project. Whatever it is, find something that will engage you and leverage your time, treasure and talents. What people really need, according to Frankl, is “the striving and struggling for a worthwhile goal, a freely chosen task.”
Through experiences and relationships. Retirement (and life) is at its best when we have loving, healthy relationships with friends and family and we are engaged in meaningful pursuits.
Through challenges or suffering. This one might seem a bit counterintuitive at first, but if you think about the times in your life that made you who you are, that taught you the most, that filled you with pride and a sense of accomplishment, my guess would be that a lot of those times grew out of a significant challenge, heartbreak or tragedy. Frankl believed that we should welcome challenges and suffering, not because they’re fun, but because they can often bring meaning and growth. He knew that we can’t always control our circumstances, but we can always control our response to our circumstances. That from a guy who was in a concentration camp and found a way to redeem his suffering and use it as the soil from which he grew his philosophy, vocation and life’s meaning.
“Between stimulus and response there is a space. In that space is our power to choose our response. In our response lies our growth and our freedom.” – Viktor Frankl
So as you move toward retirement, absolutely plan on doing fun and interesting things. Splurge on yourself. Be a little selfish. Just don’t treat the pursuit of pleasure as your ultimate goal. If you do, you’ll likely be disappointed. Instead, seek meaning and you’ll likely find pleasure and happiness as well.
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