Lately it seems that I've been reading a lot of articles on the subject of retirement. A lot of them are intended to help you decide when you are in the appropriate financial position to retire. The required nest egg advocated by the authors of these articles seems to vary a great deal. I've seen articles that recommend squirreling away up to eight times your current annual income before retiring. I'm not a financial consultant and I'm certainly not qualified to give anyone financial advice, but my wife and I have been retired or semi-retired for twelve or thirteen years and I've got to tell you that, if we had waited until we had eight times our annual income in the bank, we would still be working today.
My wife and I wrestled with the question of when we could afford to retire for years before we finally took the plunge. We read a lot of books and articles on the subject of retirement, but got conflicting advice there. The only folks we knew who had been retired for awhile and might be able to offer practical advice from someone who was walking the walk were our parents. However, after talking with them about the subject we discovered that neither my parents nor my wife's did a lot of retirement planning. They either decided that they were going to retire at a certain age or just did it on the spur of the moment. After looking at the way our parents went about it we decided that we didn't want to follow either of their paths to retirement. My mom and dad never earned much and they never seemed to need to own many things or do much of anything besides hang around the house. They managed to pay their house off before retirement and to save a little bit as well, but it wasn't much. They lived entirely on my dad's pension because he was a federal worker who neither paid into nor drew from social security and my mom didn't work long enough to draw social security either. Even so they lived in their own house until my dad was gone and my mom only had a few months to live. My wife's parents were sort of at the opposite end of the spectrum. They both worked, often more than one job at a time, and retired when they were each able to draw social security in addition to pension income. At times during their retirement they owned their own home and at times they rented and they spent all of their income enjoying life as much as possible. Eventually they could no longer buy a house and ended up in their later days with lots of memories but few possessions.
After a lot of thought on the subject my wife and I decided that the key to retirement was to maintain a balanced lifestyle. We wanted to enjoy life right now rather than spending all of our time building a nest egg or guarding it so that we would have plenty of money for our old age; but we realized that tomorrow would probably get here eventually and we would need some money to live on when that happened. We also realized that most people are never going to be healthier or feel better than they do at the current moment. So, if we were going to do something, there would never be a better time to do it than right now.
Based on what we wanted our remaining years to be like we decided that, rather than waiting until some set of conditions were met and then making a knife-switch jump into retirement, we would sort of ease into it as soon as the opportunity presented itself. My wife almost immediately made the transition by quitting her job and starting a small home-based business that provided less income but more free time. It took me a few more years to ease into retirement. The company I worked for had begun to offer early retirement packages and eventually I was able to qualify for one. After that I spent about seven years working at a variety of jobs from stocking shelves at Wal~mart to plying my pre-retirement skills at startup companies and state agencies. Eventually I quit working entirely. By that time my wife had closed her business. Neither of us was old enough for social security at that time so we cashed in some small IRAs, scrimped a lot and got by on savings and annuities. That was clearly not the best thing to do from a financial perspective, as any financial adviser would tell you, but we were ready to retire full-time, so we did it.
One of the first things we realized when we started the transition to retirement was that we wouldn't have as much disposable income as we would like to have had. I think that's one of the keys to retirement: Unless you are at the high end of the income scale and have a lot of money saved and/or some kind of annuity, you're lifestyle is probably not going to be the same as it was when you were working full time. That's the only way we were able to get through the period between when I retired full time and when I was able to draw social security. Getting by on less doesn't mean you have to live in a cardboard box though. What it does mean is that you have to make some decisions about what's important to you and how to live the lifestyle you are comfortable with using the resources you have available to you.
The income that my wife and I have from social security and other annuities is not enough to support the lifestyle we want to live. So early on we estimated how long we will live and we budget the money we draw from savings to supplement our income so that it will last for that period of time. When it comes to savings we view our house as just another nest egg. So we have no qualms about leveraging it's value to borrow money when we need it. That sort of goes against the philosophy some of our friends have. They want to leave their house and in some cases other savings to their kids. We have always raised our kids to be independent and self-sufficient so when we made the decision to retire at a relatively young age we also decided that if there was anything left for the kids when we passed away that was great, but ensuring a large estate for our kids to inherit was not going to be one of our priorities. That sounds cold to some folks, but it definitely makes it easier to enjoy your retirement years.
One consequence of easing into retirement is that you get to define what retirement means to you. So you may decide that you will never completely retire, at least as retirement is conventionally defined. You may always need some kind of supplemental income, especially if the social security coffers get as empty as many pundits have predicted. Some retirees work simply to get health insurance, which is an expense you have to consider when you define what retirement means to you. It may also be the case, especially if you are widowed, that you may want to work just to keep busy and have some contact with other people. The good news here is that many places hire older workers these days, especially for part time and relatively low income jobs that wouldn't support a person with a family to raise but work out well for retirees.
In any case, if you are willing to adjust your lifestyle to whatever your income and savings, properly budgeted, can support then you may find that you can retire much sooner than the experts would advise.
So as I see it, you can probably retire sooner than you think if do the following things:
- Define what retirement means to you.
- Decide what lifestyle you have to have to make life worth living.
- Decide what kind of estate you really have to leave behind.
- Take stock of your resources and try to make an honest estimate of how long it will be before you are in a nursing home or in the ground.
- If you can live the lifestyle you need to have with the income you will have, supplemented by your savings over the remaining years of your active life, then you're in good shape.
- If not then you will either have to work full time until you have enough put back to get by or else work full or part time at something during your retirement years.
The bottom line is that it's your life and you get to define what retirement means to you and how and when you will do it.
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