By Craig Erwin, Ph.D.
Everyone around me seems to be planning to retire soon, if they haven’t already retired. A few are likely to retire right on schedule, but for many, their plans will change. Retirement plans can change for all kinds of reasons. Consider the following situations involving my friends, colleagues, and relatives:
- One of my colleagues retired early due to Covid-19, not wanting to risk his health by returning to the office after working from home for a year.
- A colleague postponed retirement year after year after year, even though his health kept declining. He lacked confidence that he had accumulated enough wealth to sustain himself and his wife, unsure how long they would live.
- A close friend retired a year later than planned when the pandemic scared him into re-thinking his assumptions.
- My brother-in-law plans to retire at the end of this year when he turns 65, but that could change if the economy stumbles or my sister loses her job.
The problem with trying to determine when to retire is that the future is filled with great uncertainty. We don’t know how long our cars will last, how healthy we will be, how interest rates will change, or if the economy will plunge into recession right after we retire. We can probably expect to live about as long as our parents, but there are no guarantees, and just about anything can happen. We can plan based on the most likely outcomes (e.g., estimated medical expenses, budgeted annual housing and food expenses, planned car purchases, average annual utility cost estimates), but, while some events and expenses will probably be much like what we expect, others may end up being wildly different.
We can easily decide to make retirement decisions entirely based on what is currently happening in our lives and in the world. If we do, it is easy to postpone retiring if unpleasant, tragic, or catastrophic surprises occur. If an illness, recession, or stock market crash occurs soon before we plan to retire, our fear and anxiety will likely cause us to look at everything more cynically and pessimistically. But if the economy is growing rapidly, unemployment is low, and the stock market is setting records, it will likely feel like the perfect time to retire. When everything is going well, you expect things to keep going well, so why not retire?
Of course, some need to concern themselves with whether the time is right to retire more than others. The wealthy certainly don’t need to worry about timing. Any time will work just fine; the sooner the better. For the rest of us though, retiring a couple of years earlier or later can mean the difference between retiring comfortably and retiring anxiously, between enjoying new adventures each day and living in constant fear, forever hoping that no unplanned setbacks or expenses surprise us.
There are many things you cannot control. That is what makes the retirement decision so daunting. But there are also many things you can control. And the more things you control, the more confident you will feel when you decide to retire. Here are some important things you can control.
- When you retire.
- The kind of lifestyle you enjoy after you retire.
- How much help you get from professionals such as financial advisors to help you prepare for retirement and live after retirement.
- How much you save for retirement; note that how much you save is the most important factor affecting how much wealth you accumulate for retirement.
- How much information you gather on retirement before you retire by asking retirees, experts, and professionals for advice and information.
- How much debt you pay off before retirement.
- How much you educate yourself by reading everything you can about retirement and how to plan for it.
- How much you plan for retirement.
- How much you make detailed retirement spending and wealth management plans.
- How much you make retirement contingency plans (in case everything goes wrong after you retire).
- Whether you practice retiring, spending vacations pretending you are retired, traveling to where you want to retire, and trying things you want to do after retirement.
Although retirement can be both thrilling and terrifying, by planning ahead, you can make sure you are as ready as possible. That way you should experience more thrills and fewer regrets.