What is most important when deciding to retire? 

The road to retirement and the decision to exit full-time employment is an undulating road. It is one that brings up many questions, concerns, and indeed many doubts for lots of people.

This is particularly so when you are fortunate to have a choice on when you actually retire. In that situation, the internal debate could actually give you a throbbing headache!

While only you can make the decision to take an early leap from the purpose and steady income of work, there are some factors that will help you clarify your questions. I hope this helps you, either now or in the future.

The Most Important Retirement Decision Factors 

When thinking about what is most important when deciding to retire, the first is pretty obvious and probably what gives everyone the biggest quandary. However, it isn’t the only consideration you should make. And while below isn’t a comprehensive list, it will get you started on your retirement planning journey. 

#1 Do You Have Enough Money To Retire? 

Having enough money to retire is probably everyone’s biggest question and concern. This is the first question you’ll ask yourself. It’s pretty important and scary to think about.

The ‘money question’ is particularly challenging for people when we are ‘in the eye of the storm’. When markets are more volatile than they usually are, your pension/investment values are fluctuating quite a lot – often making it more difficult to plan.

Secondly, when inflation is on a temporary heightened run upwards – the thought of covering increasing cost of living throws up a mental block for many people in this position.

We have a blog that looks at this question in more detail – Determine If You Have Enough For Retirement: 5 Factors

However, don’t stop at this question when looking at your retirement preparation. Even if you’ve worked out that you have enough money, there are other things that will influence if you are truly ready to transition to retirement. 

So, don’t stop with the answer to your first question. There’s a lot more involved in planning to retire. 

#2 Are You Emotionally and Mentally Prepared To Retire? 

Asking yourself if you are mentally and emotionally ready to retire is something you need to tackle well in advance of making your decision. We interviewed Fritz Gilbert in Podcast 223, and he suggests the earlier, the better for most aspects! Fritz has recently retired and documents his journey on Retirement Manifesto website, worth checking out.

Not everyone takes this question as seriously as they should. It is a big change going from working 40 or more hours a week, seeing familiar faces every day, and having a purpose. 

Are you ready to let this routine and familiarity go? 

With this in mind, you may need to do some thinking about what you want your life to be in retirement. Are there any interests you want to spend more time pursuing? 

How will retirement affect your family dynamic? This isn’t about money, you will hopefully already include hobbies, travel, education, etc into your retirement budget. 

This question is about ensuring you can wholeheartedly enjoy your retirement and get the most out of your new stage of life. 

#3 Have You Tracked Spending and Made a Retirement Estimate? 

Retirement often means a change in your income. You will lose or reduce some incomes and hopefully increase or create some new ones (pensions/savings/investment incomes). It also means a change in how you spend your money. It is a good idea to work this new spending into your financial plan. 

One way to get a deep look at what to expect is to track your spending for at least a year before retiring. Stay strict with yourself and keep track of everything. When you hear that you might say ‘no thanks’ but we probably all agree that it is better to be over prepared than get caught short!

The results of this tracking will give you a base to work from when considering the spending adjustments that you will be making when your retire. Remember, try to keep things as reflective of reality as possible, it will pay dividends! 

#4 Life Satisfaction 

This ties in with #2. If you jump into retirement too hastily, be it for health reasons or you’re sick of your job, for example, you face possible challenges that can affect your mental health and personal life. It is actually one of the most important factors you should think about when looking at what is most important when deciding to retire.

Without having thought about what you want your life in retirement to be like, it is very easy to end up a bit lost. Many retirees have ended up in this position where they are bored and have lost their sense of purpose. Those that retire without much preparation tend to be the ones that find the transition most challenging.

In addition to putting together some ideas to explore and talking with your family, some people find it better to ease themselves into retirement. 

They might slowly reduce the hours they work or do some consulting to make the transition less abrupt. 

#5 Is Your Portfolio Ready? – Switching From Accumulating To Withdrawals 

You’ve been diligently accumulating for years but now face the daunting question of if your portfolio is ready for you to start drawing down from it. 

This is a pretty intimidating stage for most. Are you happy with the asset allocation and the other parts of your financial plan? Now is a good time to take a look at planning and make tweaks. 

Again, it is most prudent to make these tweaks based on long-term perspective as opposed to current environment/markets/inflation. If you were to make your portfolio decisions for the next 3 decades of your retirement, you’d likely stick it all under the mattress – which we know is not a sensible long-term plan, right!?

#6 Know Your Tolerance For Uncertainty 

Everyone will have a different tolerance for uncertainty, and this will have an influence on if they are mentally ready to retire. 

Uncertainty tolerance isn’t just about your investment portfolio. It also has to do with the everyday things you will face in retirement. 

• Incomes
• Purpose
• Filling your time
• Relationships
• Returns
• Draw-Down
• Gifting versus Retaining

How much are you happy to keep in your rainy day bucket or bucket for unexpected expenses? Do you want to risk potentially good retirement years before your health declines? No one can predict these, but they are things you need to consider and make sure you are comfortable with. 

Don’t Worry Too Much About Retirement Age 

The Irish Longitudinal study carried out by Trinity College concluded that “Retirement is associated with considerable adjustments to financial, physical and mental wellbeing, daily activities, and health-related behaviours.” And very interestingly, 58% of employed participants planned to retire before they reached 68 years while 22% did not plan to retire at any time.

While many people will work until the ‘official’ retirement age, this isn’t the most important when deciding to retire. You might want to retire sooner or later, that is up to you. Indeed, we see Germany debating raising their retirement age to 70, and if they do, you’ve a fair idea what the rest of us will end up doing!

If you have considered the 6 major factors discussed here and are happy you fulfill each of them, then what age you are doesn’t matter!

Choose to retire when you feel you’re ready. With a solid plan in place, you can make the decision to retire with confidence and enjoy exploring the new opportunities it brings. 

Final Thoughts – What is Most Important When Deciding to Retire?

Hopefully, this short piece has given you a starting point when thinking about ‘what is most important when deciding to retire?’ 

Having a solid plan in place will help you answer all of the factors here and with guidance, you can tweak as you go when circumstances change. 

As you can see, there is a lot to consider when thinking about this big life change.