My most recent birthday entered me into a new demographic. I am officially a senior. I have started receiving Medicare enrollment notices, and I have noticed over the last several years high school classmates announcing their retirements. A couple of months ago my younger brother asked me when I was going to retire and told me of his plans in the next couple of years. It has really caused me to think about when is the right time for retirement?
Financially ready? The best time to prepare is when you are closer to the beginning of your career, than the end. Compound interest has time as a part of the equation. One financial planner explained it this way. If a 20-year-old puts $100 dollars per month into a retirement program that averages 8% growth at age 60 they will have over $1,000,000 dollars in that account. If the same person starts at age 40 it takes $1000 per month at 8% until age 60 to have the same amount.
Most of us will need about 75 % of current income for retirement, to maintain current lifestyle. The closer to retirement that one gets, the closer they need to look at income, such as Social Security or retirement plans, savings and investments. What age do these plans require? For example, Social Security can start at age 62, however there is a reduced benefit amount and reduction of benefits with other income. An individual needs to look at current expenses and reduce debt, if possible. Medical care, prescription drugs and those related costs are a huge consideration. For some a part time job after retirement helps with finances in addition to reducing isolation. The cost of living can vary greatly depending on location. Most people look deeply at the finances of retirement, fewer look at some of the other considerations.
Emotionally, is it time to go? According to American Association of Retired People (AARP) there are 8 signs that it is time to retire. Five of them have to do with emotions: Becoming uninterested in the job having no sense of purpose, not wanting to go to work; health is suffering due to stress; feeling burned out causing problems with focusing or temper; technology is causing stress (sorry fellow boomers); desire to try something else like own a business or travel. Another group (Retirely.com) talked about not wanting to get out of bed; not feeling valued at work by younger colleagues. Ideally deciding to retire involves much more than having enough money. Understanding what is going on emotionally can help being ready to retire is important. It’s difficult to move to this next phase at times.
What can I expect after retirement? After retirement it is typical for most people to go through the 4 stages of retirement. The first stage is called the honeymoon stage this often a period of travel. I know a couple that soon after their retirement purchased a motor camper and took other family out west to see the many of their ‘bucket list’ sites. They spent several months touring national parks like Yosemite, the Grand Canyon, Mount Rushmore and the Badlands. I don’t think that they have gone anywhere in it for a couple of years now. Like honeymoons this phase ends usually with in the first year or so. The next phase is the disenchantment phase characterized by feels of ‘lack of purpose’, maybe disappointment with thoughts of ‘is this all that there is?’ The connections with others from work are missed as well. The next phase is the reorientation stage, characterized by people finding renewed purpose in art, hobbies, volunteering, business ventures, family time etc. The final phase is the stability stage, this stage is characterized by again finding purpose, enjoyment and a rhythm to life. For more on this topic watch the Healthy Aging Network Telecast.
The retirement decision is very individualized. The timing will vary from person to person.
Written by: Ken Stewart, Ohio State University Extension, Family and Consumer Sciences Educator, Monroe County.
Reviewed by: Lisa Barlage, Ohio State University Extension, Family and Consumer Sciences Educator, Ross County.