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.
TALKING ABOUT FEARS OF WALKING AWAY
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!
AN EASIER WAY TO DEAL WITH RETIREMENT
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.
YOUR HEART WILL KNOW
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. Yakezie.com, 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.
RESOURCES FOR A BETTER LIFE
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
I don’t think I will ever truly “retire”. I think retirement to me looks alot like your vacation days. Until my mind doesn’t let me do it anymore, I plan to always be “working” on something. I don’t think that “work” will always constitute a “job” for me, so that’s perhaps when retirement hits for me. When my other endeavors make it possible to support my family.
Deciding when retirement is right must be a tough decision! My dad recently retired, but I think his body told him he needed to. He worked a very physical job and once he got into his 60s, various parts of his body just couldn’t do it anymore. I think he’s adjusting well, but there always seems to be a point where the excitement of retirement wears off and you’re left with the feeling, “Ok, now what do I do?”
Yeah, if it’s physical limitations.. that’s definitely a good sign to quit. I’d just work on the other side of the brain, to answer the now what question.
My dad retired when he got an early retirement offer. He saw the writing on the wall that if he didn’t take it, they would be consolidating the department anyways. So while he probably wasn’t 100% ready to retire, he felt it was probably the best thing. For me, I envision health coverage being a very big dictating factor but that’s over 25 years down the line, so right now, it’s not highest on my list of things to plan :)
Your dad is a lucky man! If we can all get the “early retirement offer” when we actually DO want to retire, that’s the best!
[…] write a post on Yakezie.com entitled, “How Do You Know When To Retire?” where I ponder not so much the how, but the how come. Perhaps you’ll agree. Either […]
Retirement is one of two words I don’t like to include in my vocabulary. The other is divorce. I don’t ‘plan,” to ever do either. My sentiments echo Joe’s precisely. Although I know I won’t be trucking until the day that I die (if I live to old age) I will always be doing something to earn money. Ideally it will be online endeavors and/or managing rental properties that I will own. The thought of vegging out during my golden years while collecting social security and drawing off of investments just to survive, kind of gives me the shivers.
Just give it more time Matt. Even the most enjoyable of things gets old after a while. Sorry to be a downer!
Great reflections on the multiple dimensions of retirement – point out that it’s not just about money. I am so young that i have no idea when I will retire. I now (as of the last few months) see retirement as an opportunity to do whatever you want – not just sit around all day. I think I will retire as soon as possible and take up a new hobby or cause. How will I know… I guess it will just have to hit me like you said. (I’ll let you know when I figure it out).
Give yourself 10 consecutive years of working, and I think you’ll start thinking about it!
You make a great point. I don’t ever want to stop working, I just want to be able to stop working and work on my own terms. When I say retire, I really mean what JD Roth calls “financial freedom.” I want to be able to do what I want when I want, but I don’t want to stop being productive.
I don’t know when I’ll feel ready to retire… as my site name implies, I do enjoy my Day Job. Also, (I haven’t reached it yet!) the opportunity cost of retiring in your peak earning years (late 30s to early 50s) is huge – if you come back into the workforce in your 60s you can’t command nearly the same earnings you did when you left. Plus, I do enjoy the responsibilities of working even if work tries to drive me insane some days.
Also, 50% savings? Net or gross? That’s an outstanding savings rate either way.
I try and save 50-70% of my after tax income. Sometimes it goes to 80% of after tax income, however I then start wondering what’s the point of making money if I don’t spend my money.
There may a nother choice which is semi retirement. You already accumulated the amount of money you want and have the freedom to do what you want. Some may feel tied down similar to a regular job, but it is far less stressful. The real plus is you are still accomplishing things you like to do and not draining that nest egg.
You post shows that are a lot of choices and this is one more. Perhaps retirement is just a state of mind?
Retirement definitely is a state of mind. I just find it much harder to walk away than a spreadsheet dictates i.e. once one hits that number.
It’s easy to walk away from a job you hate. But if it’s a job you like at least 70% of the time that pays well and provides good interaction, it may be very, very tough to pull the rip chord.
Excellent post. For me retirement means being able to do what you love. It is freedom to be able to do what you want. And knowing myself I would be working… one way or the other, doing what I love the most.
I’m struggling with the idea of getting fired/laid off on my last day at work! My days as a corporate drone is coming to an end and I really don’t know what to do. I don’t want to sabotage any project or burn any bridges, but how else can I get fired? ugh… I should blog about this.
For me, if we can maintain our lifestyle and I don’t have to sit in a gray cubicle anymore, then that’s the day to go.
Ya gotta admit though… if you can get let go the very day, week, or month that you truly want to call it quits, how MONEY that would be! You’d get severance, and you’d be eligible for unemployment benefits to finally get some of your tax dollars back!
If you’re in good standing with your company, just hint to HR that you may be willing to be the sacrificial lamb in the next reduction in force.
The thing is, they will let go the older people and the higher-paid people. As a younger person, I’ve come to realize that I will simply NOT be let go unless I become a bad worker, which I simply don’t want to do since I want to leave on professional terms, and on a high note. No waiting for a package!
Sam, It’s fun to think about, but if you are doing anything online, do you think 1 hour /day will keep your venture going? I really really like to work, so am not looking to rush into retirement.
For online stuff…. I’ve been averaging 1 hour a day for the past two weeks while I’ve been on vacay. So far, it’s been fine, however, it feels crunched. I think 3 hours a day is what I need. One hr morning, 1 hr afternoon, 1 hr evening given clientele and readers are global.
don’t worry too much about early retirement. Just get to FI and keep the lifestyle modest enough so that work is just for fun. If work is a drag, you can leverage FI for more benefits, such as longer vacations, two hour lunches, or simply bigger gaps between jobs. If some HR rep whines about a one year gap on the resume, you can just shrug and say whatever. They will probably sense the confidence and hire you anyway.
[…] How Do You Know When To Retire? (Yakezie) […]
It is fun to think about, but I don’t know if I will ever truly retire. I will always be working on something, I both hope and fear.
I think working 2 to 4 hours a day in retirement (loosely termed here) would be ideal, especially if it’s blogging :)
I think working even when you should be in retirement age would keep your mind sharp… While the brain is not exactly a muscle, the same principle applies… use it or lose it.
Agreed. 2-4 hours is super ideal, especially spaced over a course of a day. Easy as pie and so fun to boot!
That’s my vision, too! I don’t really want to “retire”, but to me it’s all about having the choice and the freedom.
When I went to graduate school, it was the best, b/c I WANTED to be there and I didn’t have to get straight As. It’s all about having that choice.
My wife and I deal with this a lot. The game plan is to have enough money to walk away from our W2 jobs at 40. I have not problem doing this. I simply will stop doing Tech work and focus full time on financial planning. She on the other hand says why walk way from all that money? I guess we will cross that bridge when we get to it. But, it is a discussion I can’t wait to have! Talk about first world problems
It’s fun to have a goal and dream! Does your wife work? Is she telling herself the same thing and isn’t willing to walk away, for now?
I like your idea of retirement. A little bit of work mixed in with a lot of fun.
Where is this italian Japanese fusion place? I’m going to Hawaii in a few weeks and loved your last recommendation! :)
Doing some work really makes me proud for some reason. If I can lock down a deal, or write a post from 7-8am, then I feel totally free to do whatever I want for the rest of the day.
Try Angelo Pietro’s… Japanese Italian fusion restaurant with great pasta and salad dressings! Which island are you going to?
Oh I’m going to Oahu (again). I haven’t been to the other islands yet!
Thanks! Great tip- I will try to find Angelo Pietros and let you know how it goes :)
Cool. Angelo Pietros is only like $15/person. Get the potato salad. It’s cheap, good, and yummy. Go to Ono’s on Kalakaua for sure if you didn’t go yet.
BTW, when are you going? I might go there the second week of December for a week, or perhaps February, so maybe we can meet up for a drink!
I’m still unsure as to when I want to retire. I know that eventually I will want to work for myself but I enjoy the social interactions with people my age, and most of them are working and will be for a while. But mixing the days with fun and work will probably be what my retirement will look like.
You make a good point about the SOCIAL interactions. That is something so many of us take for granted and will miss. I start missing my friends, clients, and y’all after just a couple weeks of being away. I don’t think I could be away for months, let alone years.
My husband and I both love what we do, so retirement for is pretty much having enough money that we can do freelance/contract work from wherever we want.
As far a time frame goes we’re hoping to get our finances squared away first so we can have a better idea. Hoping to have all non-mortgage debt done in less than 3 years (with a good chunk of the mortgage paid down).
Sounds like you and your husband are on the same page, and on the same track! I love it when that happens. Team work. It’s the ideal and perfect thing, finding someone who shares the exact same goals. Good luck! I’m sure you guys will be successful.
I don’t think of retirement in the traditional sense either. Many people seem to suggest that it’s only a good retirement if you sit around and do nothing. This would be of little interest to me. Having the ability to do just that is fine, but actually doing that… YUCK!
Great post Sam. Sounds like you are enjoying your vacay! I like your analogy. Similar to proposing and having kids. You’ll know. Retiring during your prime earning years is quite challenging. Great food for thought. Thanks!
Yeah, I think we’ll just know. There’s no doubt that most of us will be able to retire with more than enough. As PF bloggers, it’s hard not to!
I enjoy working so I don’t really see retirement in my near future. I also think that when I do reach “retirement” age, it’s really just the beginning of something else – maybe a new hobby that turns into a “job” of sorts. I like to stay busy and can’t see myself relaxing until I’m dead. Then I’ll have plenty of time to rest. ;)
Sounds good Jennifer. It is good you have that fire, as sometimes, it burns out. Hard to come back to work after 2 weeks away, yet it’s also exciting to get back in the mix of things.
I think you can have plan when you want to retire but you never fully know how things are going to work out. My hubby and I both like our jobs but there are also things we want to do in addition to this and we hope retirement provides that opportunity. I am like LH, I like to keep busy and I am sure I will be just as busy in retirement as I am now but just with different things.
[…] Check out how big it is in the video:Now here are a few great reads around the web:Sam contemplates How Do You Know When To Retire Suba discusses Big rewards, lousy performance: When motivation fails Moneycone reveals 9 Impulse […]
I’m happy working for now, in the middle of my third decade of medical practice. But I have fun most days, and other than the call, I love what I do.
Would love more blogging time, but that’s not in the cards for now.
If I can work another 5 years or so, I should be able to walk away if I desire, but who knows if I’ll want to.
Doctors seem to be able to work until 70 no problem. I’ve met so many! They just seem to love it.
The question is, what if you made at least 50% of your doctor income via blogging?
I think knowing when to retire for me will depend a lot on if I decide to have kids or not. Even if I quit my day job to be a stay at home mom I don’t think I’d be happy not earning any income. I’d like to be able to work part time or at least have a side job or two because it feels good to work hard and earn money. I like your Hawaii vacation timeline. That’s awesome. :)
There’s no retiring if one has kids! :)
It’s funny that you say nothing ever goes as planned, it is so true! But, I ‘plan’ on creating assets to live off of, instead of relying so much from earned income. I hope to use those assets to give me income for the rest of my life, and at the same time investing most of it into the stock market as well as more secured investments such as an IRA! It’s my goal to retire before age 60, but I definitely am trying to avoid being in the work force!
Sounds like some good goals, and I hope you achieve and beat them! Try shooting for 50 actually. We could be dead by 65-70!
BTW, have you checked out gravatar.com? You should if not. It’s fun and helps connect the name with an image.
I don’t think I will ever truly retire. I would, however, like to be financially self sufficient and not have to work for anyone but myself. I would continue to blog and help people become financially literate. Good post. I have been to Hawaii twice and loved it!
I think it depends on whether or not you enjoy what you do. If your work gives you fulfillment, you’ll want to stay in the industry during your peak performing years. But if its just a paycheck and nothing more, you’l be unsatisfied there once you have enough money to leave.
I am 4 years into my career and not that far off from the maximum. There is no way in heck this career will pay $250k, but I could see low 100ks by the 50s and 60s. However, that seems a long and hard way to go about it. I am simply not for roasting away for decades just so I can potentially enjoy a high net worth when I am old an decrepit. I am perfectly down for trading off some of that higher net worth later on so that I can embrace more opportunities, now. Who knows, taking more chances now that I know won’t hurt me might even give me more opportunities later on. Sitting in a cubicle and doing your job is safe, and easy, but not necessarily a path to future growth.
I would DEFINITELY take way more chances if I were you. 4 years into your career is but only the 1st inning. Go for glory and swing baby swing!
$100,000 at age 50 is not enough imo for you to get excited about!
Young people, believe me you will get tired of a regular 8-5 job. I am mentally ready to retire from my day job to an online job, but not financially.
Affordable health insurance is a big consideration as well as boosting savings. We’ll re-evaluate the situation when I turn 55 and then every year after. My husband being 10 years old is a big factor in the decision. We want time together when we’re both relatively healthy.
Kay, I’m as open minded as the next person, but your husband is 10 years old? ;)
Oops! Those two missing letters make a big difference. That’s “older”. :)
If I’m successful, I’ll probably retire when I’m 40 something and start a charity. But if I’m not, I’ll keep trying, even if I die while trying.
Like you said, what are we saving for if we achieve the goal to retire but continue working for different reasons whether it’s not being able to let go of the 250k salary, whether it’s the social aspect of the job or because we are scared to death at what to do once we do retire. Wouldn’t it be better to live a balance life, spend a little and enjoy some of life’s luxuries while you are younger and not worry so much if we have to work when we’re 60. Like lots are saying, they don’t see themselves stopping work completely when they retire. When I accumulated my 1st million, it didn’t change much in my life and now I have the second million, again not much has changed in my life except the fact that I have to worry about where to invest that money to earn income and not to lose that money. I remember in 2008 where I lost 100k on about 300k invested. A market crash like that would wipe out over 667k of my 2 million. These are things that most people don’t have to worry about. And spending that money doesn’t change much as I recently bought a bigger house which I didn’t need and that hasn’t changed much in my life except that I have a bigger property to maintain. Actually, that house would have probably been better when the kids were growing up instead of saving money and not now that we are just me and my wife.