I’ve been writing a pamphlet on the questions people most frequently ask us. Today I came to, “Can I afford to retire?” This may actually fall in the top three right alongside, “How can I spend all my money so my kids won’t fight over it?” I will save that one for later.
Asking your financial advisor if you can afford to retire is like asking your travel agent if you can afford to take a vacation. The answer in both cases is a definite, “Yes” but it’s the follow up questions that are the most critical. Everyone can afford to take a vacation of some sort, but the real question is “Can I afford to take my dream vacation?”
I generally respond to the retirement question with two of my own. #1 – Tell me what retirement looks like to you and I will tell you if you can afford it. #2 – Tell me how much money and resources you have, and I will tell you what type of retirement you can likely afford. Everyone can technically retire from the workforce today, but not all will enjoy the living conditions such a move would force them into.
A third question many overlook is, do you really want to retire? I work every day with retired people, and I have found that many don’t like it as much as they expected to. I know that I personally have no desire to fully retire from work because I find so much enjoyment helping people solve their financial challenges. I see how it makes their lives easier and brings them more peace and that makes me happy. So why would I ever want to stop? Of course, I don’t have as much fun doing paperwork so retiring to me would include continuing to do what I love while passing on some of the daily tasks to younger and more energetic individuals who are at a different stage of life.
Retirement is a very personal activity. It looks different to everyone and honestly, when you get closer to it retirement often looks much different than it did when you saw it from afar off. In my 20’s I imagined retiring in my 30’s to a beautiful Hawaiian beach. Now I view retirement as a time to continue being productive at work while having a little more time and resources to enjoy things I couldn’t before.
What does retirement look like to you? Write it out on a piece of paper. Now list the resources you have available to pay for it. With that information in hand, you can stop by or call our office and one of our CFP® professionals can tell you if it’s possible. If not, you will have some choices to make. Put off retiring a bit while you build resources or accept a more modest retirement. One important piece of the math puzzle is to remember the double benefit of every extra year on the job. It will increase your savings while also reducing the cost of retirement by a full year.
So, “Can I afford to retire?” It depends.
Dan Wyson, CFP®is author of “The Gold Egg,” and “21 Financial Myths” and owner of Wyson Financial/Wealth Management 375 E. Riverside Dr. St. George, UT 84790 – 435-986-9525 – Securities and Advisory services offered through Commonwealth Financial Network, member FINRA/SIPC, a registered investment advisor