retirement

How to Know It's Time to Retire

The decision to retire is a personal one that's as much psychological as financial.

My college roommate, Molly, recently invited me to a mini reunion to mark the 50th anniversary of our high school graduation. Inevitably, the conversation turned to retirement: who was thinking about it, who had done it, how it was working out.

One classmate, Marie, had retired as a school psychologist. Another, Karen, had repurposed her skills to start a new part-time career after being laid off from her corporate job in human resources. She’s now a consultant for downsized executives and has no plans to formally retire. Molly, a scientist, is struggling with how to bow out of her administrative responsibilities while continuing her research on the causes of skin and oral cancers. All of the women were curious about what had made me decide to retire.

As their experiences show, the decision to retire is a personal one that’s as much psychological as financial. “Retirement is really a lifestyle change triggered by some event,” says Brian Sykes, a certified financial planner in Blue Bell, Pa. “In a way, clients come to me asking me for permission to retire.”

Retirement Triggers

Aside from involuntary catalysts, such as layoffs and health issues, those triggers often fall into several categories. One is family. Many people simply want to be closer to relatives or spend more time with grandchildren. Another is career restlessness—the desire to do something different, make more of an impact or just have more flexibility. Still another is a reminder of mortality, such as experiencing a health scare or receiving news of the death of a close friend or family member. “People realize that time is their one fixed resource, and how they spend it becomes more important as time shrinks,” says Sykes.

Whatever their reasons for retiring, “people make decisions emotionally and then use the numbers to justify those decisions,” Sykes says. “My job is to fill any financial gaps.”

It’s not uncommon for people to hold on to a job too long, sometimes for financial reasons or fear of the unknown. “Unless you have a really exciting plan to transition to, there are a lot of psychological reasons not to retire,” says financial psychologist Brad Klontz. “If it turns out well, it’s usually because people have pretty good social connections or haven’t totally retired.”

Klontz points out that baby boomers are the first generation to face the challenge of how to plan for a retirement lasting 25 to 30 years. To ease the passage, he suggests picturing a post-employment “psychological timeline.” What will you be doing, say, three years after you leave your job? Where will you be living? Who will you be spending time with? “You have to be very specific and realistic about your post-retirement lifestyle,” he says.

As for my own decision, I can check a number of the boxes here. I wanted more flexibility to travel and get to know my young grandchildren. I felt it was the right time to make a smooth transition to my successor, and the idea of writing a column each month was appealing. I even made a retirement to-do list—write, volunteer, babysit, exercise more, travel, remodel the bathrooms, clean out the closets—and a schedule of what I’d do each day.

Seven months in, my week looks nothing like I pictured it, and much of my to-do list is waiting to be done. Babysitting and traveling have worked out fine, and I’ve stepped up my exercise. But I haven’t had time to tackle the bathrooms or empty a closet or fit in volunteer activities, which I’m still researching. Because I continue to write, it often feels as if I’m not retired but working part-time with a lot more flexibility. Retirement for me is a work in progress, but I’m happy to take on the challenge.

How about you? If you are retired, how did you make the decision, and have things worked out as you planned? I’ll be happy to share your experiences and advice.

Most Popular

Your Guide to Roth Conversions
Special Report
Tax Breaks

Your Guide to Roth Conversions

A Kiplinger Special Report
February 25, 2021
How to Calculate the Break-Even Age for Taking Social Security
social security

How to Calculate the Break-Even Age for Taking Social Security

When it comes to maximizing your Social Security benefits, there are many elements to consider. One factor that can be especially enlightening is your…
August 30, 2021
Spend Without Worry in Retirement
Financial Planning

Spend Without Worry in Retirement

Fears of running out of money prevent many retirees from tapping the nest egg they’ve worked a lifetime to save. With these strategies, you can genera…
August 30, 2021

Recommended

How Exactly Do You Stress-Test Your Financial Plan?
retirement planning

How Exactly Do You Stress-Test Your Financial Plan?

Some tasks are not good for DIYers, and stress-testing your portfolio is probably one of them. Because individuals don’t have access to the same tools…
September 18, 2021
What Is the Social Security COLA?
retirement

What Is the Social Security COLA?

This year especially, cost-of-living adjustments are late to the party, as consumers are feeling the effect of price spikes now.
September 16, 2021
Retirees Likely to Receive Significant Bump in Social Security Benefits in 2022
social security

Retirees Likely to Receive Significant Bump in Social Security Benefits in 2022

The cost-of-living adjustment for Social Security benefits for next year is expected to be the largest since 1982.
September 16, 2021
The Downside of Delaying RMDs
required minimum distributions (RMDs)

The Downside of Delaying RMDs

With the SECURE Act 2.0, Congress is contemplating raising the age for required minimum distributions. However, don't assume you would benefit from th…
September 16, 2021