How Do You Know When To Retire? Thumbnail

Despite all the wonderful imagery of being retired, maybe it’s not so great after all.  Vacations are more fun because of work. Food tastes even better when we’re starving.  Finding a nice Four Seasons hotel bathroom after eating incredibly spicy Thai food that’s ripping through your system is heaven.  Soaking in the outdoor hot tub after eight hours of skiing can’t be beat.  Finding true love in your loneliest time trumps them all.

Every time I go on vacation, I like to pretend I’m retired and leading a location-independent lifestyle.  It’s fun to day dream as my goal is to retire within 10 years and live off my savings, investments, and online initiatives.  It’s exciting to go on test drives without any pressure to buy the car. Having a robust 401k that I’ve been maxing out for over a decade is really comforting.

It’s important to have confidence retirement is right thing to do, because once you remove yourself from the work force, especially in this market,  it may be hard to return if you change your mind years down the road.  I’ve got this grand plan of being laid off the last day that I want to work so I can get some severance and maybe even some of my tax dollars back in the form of unemployment benefits.  Tell me I’m not the only one who has this idea?  Ah, to dream.

Here’s an example of a typical vacation day in Hawaii:

7am: Wake up and work online for an hour.

9am: Eat breakfast consisting of my favorite fruits: papaya, mango, and pumelo.

10am: Go to the beach, play tennis, or go golfing for another 2-4 hours.

12noon: Lunch at a favorite local restaurant (Hawaiian, Korean BBQ, or Italian Japanese fusion)

1:30pm: Come home and check online communication for 30 minutes.

2:30pm: Take a 30-minute nap.

3:00pm: Spend time with the family playing tennis, surfing, body boarding  hiking, or laying by the pool.

6:30pm: Have dinner with friends.

8pm: Watch a movie or go to a show.

10:30pm: Work online for another 30 minutes to an hour.

Midnight: Read, go to bed and dream.

Pretty standard things that probably mimics a lot of what you would be doing on vacation too, except for perhaps the work part! I love to work and the ideal amount is 2 to 4 hours.  I think if everybody were able to work less hours a day, they’d probably love their jobs that much more and last that much longer too.

Everybody has a responsibility to keep finding something they really enjoy doing for work.  We’ve only got one go around, so instead of settling, we owe it to ourselves and to our family to find happiness.  My happiness simply includes everything I’ve written in a typical day above in the time increments I want them to be.


One of the big problems with retiring in your forties and fifties is that you have to walk away during your prime earning years.  For argument’s sake, let’s say you work in one of the numerous high paying industries that pays over $250,000 a year at the age of 40.  You’ve always been a diligent saver and have never lived off more than half of your income.

Despite saving 50% of your earnings for a couple decades, you’ve also gotten used to living a very comfortable lifestyle, which includes a fabulous house, a vacation home, membership to a couple clubs, charitable commitments, and two-week long family vacations, two to three times a year etc.  Meanwhile you have a 10 year old daughter and 8 year old son in school to support as well.

Even if you have millions in savings and retirement investments, and a large cushion of property equity, walking away from a job making $250,000+ a year won’t be so easy.  All you’ve got to do is work another 12 more months and your bank account will be flush with another $50-$75,000+ in after-tax savings!  Even though you’ve been making that kind of money for a decade, you still realize it’s a lot of money to walk away from.

If it pleases you, replace $250,000+ in your forties and fifties with $100,000 or whatever amount is reasonable in your line of work.  I think the results are the same given you’ve been used to making that money for a while and everything is relative.  It’s tough to walk away during your prime earning years!


The fear of walking away during our prime working years is that we’ll never be able to make that type of money again.  There’s also a risk that we fail to achieve our potential.  Instead, perhaps an easier way to deal with retirement is to retire even earlier, say in your thirties where you never will experience your full potential as a person in the workforce.  It’s easier walking away if you are earning less and have less responsibility.

Conversely, you could work throughout your forties and fifties and retire at a more conventional age of 60-65, thereby maximizing your highest earning years, giving yourself the best opportunity for a financially secure retirement, and minimizing any work-related regrets of not giving it your best.

Working until you are 60-65 might bring you some other regrets such as not doing more while you were younger.  There is of course another risk that you die soon thereafter.  However, hopefully you have maximized all your vacation days at your firm wisely to relax and go on great adventures.

You can also use a retirement calculator to help give you an idea of how much money you could have by the time you want to retire. Perhaps you’re not saving as much as you think.


You can plan all you want, but nothing always goes according to plan.  Always think in 5 or 10 year chunks when you do things., for example, is currently on year 2 of a 10 year chunk.  It would be great if my online initiatives and investments can achieve 100% of my day job income in 5 years time.  I doubt it, but I won’t know if I don’t try.  It will be even harder walking away with double the income.

Perhaps it’s best not to plan too tightly for the future.  When it comes to deciding when to retire, it’s a fools game to set a specific age.  Deciding when to retire is perhaps very similar to when we know it’s time to propose or have children.  We have a rough idea of when, but it’s only when our hearts push us forward, do we finally find the conviction to let go.

If you are retired, I’d love to hear your perspective on how you decided it was the right time, if it was up to you.  What were your fears when you finally made up your mind?  What are the things that would have made it easier for you to retire even earlier.

If you are not retired, how will you know?

Please read, “The Dark Side To Early Retirement” for more thoughts on why it might not be a good idea to retire early.


Manage Your Finances In One Place: One of the best way to become financially independent and protect yourself is to get a handle on your finances by signing up with Personal Capital. They are a free online platform which aggregates all your financial accounts in one place so you can see where you can optimize your money. Before Personal Capital, I had to log into eight different systems to track 25+ difference accounts (brokerage, multiple banks, 401K, etc) to manage my finances on an Excel spreadsheet. Now, I can just log into Personal Capital to see how all my accounts are doing, including my net worth. I can also see how much I’m spending and saving every month through their cash flow tool.

Negotiate A Severance Package: Don’t quit your job, get laid off and negotiate a severance package instead. Negotiating a severance enabled me to receive six years worth of living expenses from a company I dedicated 11 years of my life to. If I had quit, I wouldn’t get any severance, deferred compensation, medical benefits, job assistance training or unemployment benefits and neither will you. I believe so strongly in the message of never quitting that I spent a couple years writing this 100-page book entitled, “How To Engineer Your Layoff: Make A Small Fortune By Saying Goodbye.” I’m absolutely certain this book will help you recognize your rights as an employee and break free from the corporate grind to do something you truly want to do.

Updated for 2015