When Should I Retire? After Answering These Questions

2 Questions to answer before you decide when you should retire.

A lovely woman who decided to retire.
Ask yourself these two questions to help you decide when you should retire. Hero Images/Getty Images

Retirement is about the alignment of two things: money and values. When deciding if you should retire, that means you have to know if you can afford to (the money side) - and you have to know what retirement means to you (the values side).

You’ll be able to answer the question “when should I retire” after you’ve worked your way through these two questions.

1. Can I afford to retire and maintain a lifestyle that is comfortable for me?

Just because you’ve reached retirement age and might be eligible for a pension or for Social Security – that doesn’t mean you should retire.

Maintaining a comfortable lifestyle means different things to different people. For example, if retiring today could be accomplished but you would need to downsize your home, car and overall lifestyle, would you do it? Some of you absolutely would – others would prefer to work longer if it means you can maintain a higher standard of living in retirement. The question is not can you retire - but how much do you need to have saved to have the kind of retirement you want?

It would be nice if there were a simple answer that would tell you how much you should have saved in order to retire, but everyone is different, and the right amount for you may be entirely different than the right amount for your neighbor. You’ll need to work through your numbers to calculate out how much you need to have to afford YOUR desired retirement – that will be the only number that matters.

To determine if you can afford to retire there are several steps you’ll need to take.

  • First, estimate your total annual spending. Include periodic expenses like dental work and home repairs.
  • Add up all your potential sources of income in retirement. Be sure to look at how much more income you may get by claiming Social Security at a later age, or waiting to collect your pension until a later age.
  • Be realistic about how much you can withdraw from personal savings and investments. Withdraw too much, too fast, and you can risk running out of money too soon. Be cautious about using academic rules of thumb. Those don't always work so well in the real-world.
  • Don't be shy about seeking professional help. Retirement is a big decision and many of the decision you'll make are permanent. A qualified retirement planning expert can help you come up with a projection based on realistic assumptions.

If you go through your financial projections and determine you can’t afford retirement, then you shouldn’t retire. Instead you should explore ways to save more, or find work you enjoy so it doesn’t feel as work-like. Revamping your career may allow you to work longer and accumulate the funds you'll need.

If your finances are lined up to support a comfortable retirement your next item on the “should I retire” quest is to explore the softer side of retirement – what it means to you.

2. Do I know what retirement means to me?

For some of you retirement means simply leaving your current job. You’re ok working – you just don’t want to keep doing what you are currently doing – and making a change may come with a pay cut.

For others, retirement means you won’t be earning money in any capacity. It’s important to define what retirement means to you, and if you’re married, discuss it with your spouse.

Some career oriented people are not cut out for retirement. They are used to being “the go to person” and find they get bored in retirement. If this sounds like you, remember the answer as to when you should retire might be "never". Before you retire give some serious thought to what activities inspire and motivate you. Start a list of hobbies you want to pursue or organizations you want to contribute to.

As an alternative to traditional retirement, look for ways you can “try out” retirement. Does your current situation offer part-time work, or a sabbatical? Can you take a long leave of absence? Retirement is a major life change just like moving, marriage, or a job change so plan on going through an adjustment period.

The more time you spend thinking about and planning for retirement the more likely you’ll be able to shout out “Yes, I should retire now!”