March 9, 2021 — It is a perennial question that affects just about everyone – when is the best time to retire? Sometimes one has no choice in the matter, such as airline pilots or military personnel who reach a maximum age or length of service. Others are laid off from a job in one’s late 50’s or 60’s, before they wanted to stop working. Fortunately many of us get to choose when we retire. But answering that question is never easy.
Our friend Robert Powell just wrote a fabulous article on “What Is the Right Age to Retire“. He outlines the major questions that need to be answered, which we will touch on here and add a few of our own.
Are you ready to FIRE?
The FIRE movement (Financial Independence Retire Early) has many adherents. They are mainly people who want to quit working as soon as they can, and they take amazing steps to save enough money to do that. It has its pitfalls and its triumphs, but it is clearly not for everyone. Certainly amassing enough money to be able to retire is a comfortable place to be. Whether you believe in FIRE or not, if you won’t have enough money to live on comfortably, you are not at the right age to retire.
Tired of working
Some people are burnt out and ready to retire or do something else. Leaving a physically demanding job or one that is especially stressful can be very good reasons to retire. That assumes that they have the resources to live comfortably without a paycheck coming in. Or, the ability to find a new job that can bridge the economic gap.
Hitting Social Security Age
The earliest one can get a Social Security retirement benefit is age 62. Of course if one takes it that early there is a significant reduction; the benefit is only 75% of what it would be at Full Retirement Age. Compared to waiting until age 70 when benefits are maxed, the lifetime income given up from taking them early is even greater. The situation for married couples can be more complex. For example, if one spouse is either still working or getting a higher benefit based on age, retiring at 62 or thereabouts might be an attractive option for the other. In our opinion, retiring at age 62 solely because that is when one is first eligible is not a compelling reason to do so. Many other factors might be more important. A compelling reason for claiming early is when one has no alternative way to put food on the table and a roof overhead.
Becoming eligible for Medicare at age 65 is a strong incentive to retire for many. That is particularly true for folks whose employers do not provide health care insurance. Medicare Part A is free and premiums for Part B, C, or D are much more reasonable that paying for them on one’s own.
Do you have a pension?
Lucky you, this benefit has gone the way of the horse and buggy for most people. But for folks with a pension the decision on when to retire usually comes down to the numbers. For example, there is usually a magic number of years of service, possibly with an age component as well. If one is not at that number, then it would be very costly to retire. Some plans pay more for years beyond the minimum, others don’t change past the minimum. The decision can be complex enough that a financial advisor might be a good idea.
Then there are buyouts. Employers are often eager to get higher paid, older workers off the payroll, so they offer buyouts for early retirement. Then it becomes a complicated problem to figure out if the offer makes sense for the employee, or guessing if a better offer will come along.
One of our friends is a college professor and was offered a buyout. Financially it made sense, he could go to emeritus status and start taking his pension. But he would no longer be the head of his department. He might not be responsible for the research projects he loves, nor get to teach some of his favorite classes. So he turned down the buyout, and is very happy with the decision.
Do you have a Plan B?
Retiring just because you can doesn’t always makes sense. If you don’t know how you are going to fill your days you might regret losing the income, prestige, social connections, and routine of having a job. But if you know what you want to do (volunteer, start a business, live abroad, pursue favorite pastimes, etc.), and you have the financial resources to live comfortably, then retirement is often the right decision.
This is often the happiest way into retirement. If you own your own business or your job allows it, starting to take more time off while keeping your hand in can be very rewarding. We know many people who have turned the operations of their businesses over to a partner or child while they maintain responsibility for some piece of it, on their own terms. Or, they reduce their workload so they can go south for most of the winter, or go back and forth from a summer place. Not everyone can do this, but it works great for the many who can.
Some people will never retire, or at least they will work for the foreseeable future. Look at Dr. Anthony Fauci, still doing his job at 80. If you love what you are doing, why would you want to quit and risk boredom? Everyone has to answer that question on their own, everybody is different.
A personal note
Your editor has enjoyed a partial retirement for the last 14 years. I retired from my real job at age 58 to start Topretirements.com. At the time my company was changing and I was ready for something different after 25 years. Fortunately, this site has worked out better than I ever imagined, and provides the perfect combination of challenges along with rewards. But best of all it gives me something interesting and fun to do every day, while allowing 70% of my time for sports and fun. And, I get to interact with an amazing group of Members and visitors!
When do you think is the best time to retire? Have you done it already, or are you waiting. Please share your brief stories in the Comments section below.