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.”

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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.

Janet Bodnar

Janet Bodnar is editor-at-large of Kiplinger's Personal Finance, a position she assumed after retiring as editor of the magazine after eight years at the helm. She is a nationally recognized expert on the subjects of women and money, children's and family finances, and financial literacy. She is the author of two books, Money Smart Women and Raising Money Smart Kids. As editor-at-large, she writes two popular columns for Kiplinger, "Money Smart Women" and "Living in Retirement." Bodnar is a graduate of St. Bonaventure University and is a member of its Board of Trustees. She received her master's degree from Columbia University, where she was also a Knight-Bagehot Fellow in Business and Economics Journalism.