When is the Right Time to Retire

Your finances aren’t the only thing that dictates when you retire. Your health, emotions and current job situation all play supporting roles.

There’s no one formula that will tell you when the right time to retire is, but one thing is for sure, the amount of money you have will always be the deciding factor.

“A lot of people can get by with 25% or 50% (of their income),” says Clarence Kehoe, executive partner in accounting firm Anchin, Block & Anchin.  “But if you want to have an enjoyable retirement, the general rule of thumb is to use 80% of your working income and assume that’s needed in retirement, which is a pretty significant sum.”

According to financial experts, one of the first steps to figuring out when you can retire is taking a realistic look at how much money you will need.

While it may be hard to envision what your life will look like at age 75 or 85, it’s important to paint as detailed as a picture while you are still working. For instance, do you plan to travel when you no longer work, will you be downsizing or moving, will you have adult children to care for and/or do you have enough money to cover any unexpected expenses including healthcare needs, are things you need to consider.  You also want to figure out how much income you will be bringing in each month whether it’s from a pension or retirement plan, social security, investments or other benefits you can expect to receive.

Once that is all worked out, you’ll have a good idea of how much longer or little you need to work to maintain your lifestyle in retirement. “You have to know you have enough money once you retire,” says Jeremy Kisner, senior wealth adviser at Surevest Wealth Management. “It’s very hard to go back and earn the same level of income.”

While finances is the major factor in your retirement time horizon you’re emotions also matter a lot. According to experts, many people continue to work well into their 70’s not because they need the money but because they wouldn’t know what to do with all the free time. Work can often be a source of self-esteem and self-worth for people, which is why it’s not easy to give it up. “It really depends on the individual,” says Kenn Tacchino, professor of taxation and financial planning at Widener University. “For myself retirement is not something I look forward to. I can’t handle a long weekend let alone a month off.”  Tacchino says in order for people to be happy in retirement they can’t look at it as they are stopping working but that they are retiring to something.  Just like you have a game plan for your finances, you also need one for what you’ll spend your days doing when you stop working. “You have to keep having reasons to be on this planet,” says Tacchino. “It’s a big key to this.”

Although work makes many people happy, it could be a source of stress which may prompt you to want to retire early. According to Kisner there are countless people who hate their job and would be much happier pursing something else in retirement. If you fall into that category, then retiring sooner rather than later may be the best option for you, granted you can survive financially without your full income.

“Some people are willing to have a smaller travel budget in retirement or downsize their house so they don’t have to go to their job for two more years,” says Kisner, pointing to one client who hated his job so much he was on anti-depressants for 25 years. On the day he quit, he knew he wouldn’t need the medicine anymore, says Kisner.

Your health will also play a role in when you retire. Healthy people can continue to work for years and years after they reach their full retirement age, but often an unexpected illness will force them to exit the workforce sooner than expected. In fact according to Tacchino around half of people are forced to retire early because of health issues. Although it’s impossible to predict 100% if you will be healthy in your old age, Kehoe says one way to get an idea is to look at your family genes. For instance did your mom and dad live long or die at a young age Also what kind of health issues run in your family. “If your parents lived to 100 than you have a longer horizon and can work longer to save money,” says Kehoe.