Last week I received a call from Ann who could not decide if she was ready to retire. Based on the lifestyle she’d like to have in retirement, she needs about $70,000 a year in income. If she retires right now, she will receive $52,000 in pension benefits, $11,000 in Social Security benefits, 80% of her retiree health benefits paid by the company, and have $1,500,000 in savings. Hmm…sounds pretty good, so why on earth is Ann so torn over making this decision? The truth is there are a lot more things to consider than just finances when it comes to retirement.
In my previous post I looked at some of the financial questions that are asked when someone is contemplating retirement but regardless of how financially prepared you may be, that still does not necessarily mean you are ready for retirement. Before you make the decision to retire, you must also consider the non-financial issues.
Are you emotionally ready for life after employment? – Many employees get great satisfaction from their job. It’s nice to think you are needed and appreciated and contributing to the success of your team and your company can bring a sense of pride and accomplishment. But what happens when you no longer report to someone else or you no longer have a team to play for? Will you have other “teams” to play for, such as family and friends, or will you have hobbies and projects you can complete to fill that sense of accomplishment? Figure out what it is about the job you are doing right now that brings you the most fulfillment and look for ways to replace it in your life after employment.
Are you socially ready for life after employment? – One of the things I cherish most is the companionship of my workmates. For some, this is the only thing that keeps them coming back to work each day. It would be great if they came home with you as part of your retirement package but it doesn’t work that way. Someone that is single or widowed may start to feel lonely if not surrounded by coworkers. Even spouses that have spent 8 or more hours apart each workday suddenly feel like strangers when there is no more workplace to go to. If the prospect of being home each day doesn’t sound all that interesting, here are some things you can do:
- Volunteer with a favorite charity or organization.
- Organize a “fun and games” night with friends.
- Join a bowling league or country club.
- Visit family, near and far.
- If you really miss your work buddies, ask your ex-employer if you can come back part-time or as a consultant.
The bottom line is you should find ways to stay connected with your friends, family, and community.
Are you physically and mentally ready for life after employment? – We’ve all heard the story: Jim retires after 30 years with the company only to pass away a few years into retirement. Depending on the type of job you perform, retirement may mean a decrease in your physical and mental activity. As a result, it may also mean a decrease in your life expectancy. Medical science suggests that some of the ailments that were previously attributed to aging may in fact be attributed to not being active. Before taking that permanent vacation, ask yourself what you plan to do to stay physically and mentally active. The University of Iowa has some suggestions for ways to stay active after retirement.
Are you medically ready for life after employment? – Most employees are covered by a health plan at work but few are covered by retiree medical benefits. The most common source of health benefits for retirees is Medicare but Medicare eligibility does not begin, in most cases, until you reach age 65 and even then, it only covers you. Are you dependent on your company’s health benefits for things like annual checkups, prescription drugs, or coverage for dependents? If so, this may be another reason to stay on the job for a few more years.
Ann said something very interesting to me before she hung up the phone. She said working in her current position brings her a certain level of stress but the idea of not working would also be stressful so she really just needed to decide which type of stress she would prefer. I never really thought about it that way before. I just always thought that once you had enough money you were good to go but as you can see, the decision to retire is not that simple.
For some, the decision may not be that difficult. When it comes to the non-financial issues, I’ve been ready to retire probably since the day I started working (no offense to my current employer) but I’m nowhere near financially ready. Others may be financially ready but nowhere near where they need to be regarding the non-financial issues. It’s only when both the financial and non-financial issues are at peace that you can truly say you’re ready to retire.
Finding a balance before retiring so that your not left with the question, ‘now what’, when you get to that point is something I think about. When my husband and I talk things we want to do, we talk about things we want to do now, what we want to start doing when the kids get a certain age, when they start moving out of the house, etc. Things to do before we are ‘brittle’ (phrase stolen from my niece) Just haven’t figured out the five and ten year budget plans yet. It seems there is so much to figure out how much to live on when retired, but how do you figure the fun money into the equation?
Hi Sarah, I think it’s good that you are talking NOW about these things, rather than waiting until you are on the doorstep only to be stranded at the threshold. As far as the budget, I guess the first step would be to determine the cost of “fun” in today’s dollars. For example, If you and your husband like to play golf at $100 a round, and you play four rounds a month, you’re looking at $400 a month, in today’s dollars. So factor in cost of living increases (see the Savings for Goals calculator here: https://secure.financialfinesse.com/go/2991) to gauge what the future cost would be. Not everything that you might consider “fun” has to cost money, but I’m sure there are a few things that do. Retirement, like life, goes through stages, and you may have a more active lifestyle during stage one of retirement, a moderately active lifestyle in stage two, and a less active lifestyle in stage three. You can plan your income and expenses for all three stages. Depending on how close you are to retirement, this all may be a little more theoretical now, but I’ve been told that it gets easier as you get closer to the day you say good-bye to full-time employment. Until that day comes, I’ll just have to keep dreaming. Greg