What If I Retired Today?

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Halfway through a long, rocky hike in the Great Smoky Mountains, I realized I was in over my head. Underprepared and overwhelmed, I felt done. Whether pushing ahead or turning back, I had 7 miles to travel. Just as I was questioning my life choices, my son suggested we call the park ranger station or even 911.

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“Wow. What would that look like?” I thought. “Was I really in that bad of shape?” As tempting as a tap-out sounded, I was able to get by with an extra Gatorade and an energy bar instead of a rescue helicopter and an IV hookup. Six hours later, legs battered, ego bruised, I finished the hike in the dark.

We all face moments of self-doubt and indecision. Sometimes we reset and sometimes we retreat. It’s the same on the road to retirement — some of us feel stuck and others are striving. If you’re rethinking your next planning move, don’t panic! Instead, ponder: If I retired today, what would that look like?

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If I retired today, what would my cost of living look like?

This part of the picture is not ideal. When you consider how incredibly fast the inflation rate rose from a long, comfortable period of lows to today’s historic highs, pausing to evaluate current economic conditions may seem wise. In the span of just one year, the inflation rate notched its largest increase in 40 years in June with consumer prices up 9.1%. This was the biggest 12-month increase since the year that ended in November 1981, when the consumer price index reached 9.6%.

Whatever direction inflation goes from here, it’s having an impact on us all, and in some ways inflation could affect retirees more than others. What are we seeing? Higher energy prices — including a recent record high for gas — and cost increases for a broad range of other items, such as groceries, travel and shelter. What does this mean for retirement? An inflation rate of just 4% will cause the cost of everyday items to double during the course of the average 18-year retirement. At an 8% inflation rate, everyday costs could double in nine years.

If you decide to push forward with retirement, the outlook is not all bad. This year, the Social Security Administration raised benefits by 5.9%, the largest cost-of-living increase in 40 years. While that spike for retirees fell short of today’s inflation gap, there may be a 9.6% increase for Social Security beneficiaries in 2023 to make up for sky-high inflation, according to a recent projection by The Senior Citizens League, one of the nation’s largest nonpartisan senior advocacy groups.

If I retired today, what would my nest egg look like?

If you take a peek at your 401(k) balance in this volatile market environment, the picture can change frequently. However, if you do look, try not to touch because your portfolio can be like a bar of soap — the more you handle it, the smaller it might become. But digital planning tools and online calculators are available to help keep you on track and moving forward. For example, you may want to consider the broad range of useful retirement planning resources available online at these sites:

No Normal Retirement Journey Map and Guide — Alliance for Lifetime Income and Aging Well Hub at Georgetown University
LifePath® Spending Tool — BlackRock
Retirement Calculators and Tools — Fidelity
Find Your Path — Jackson

Retiring today could be compared to starting a hike at the bottom of a hill. You may face a steep climb before you can set a more comfortable pace. When taking withdrawals from your portfolio, the order of your investment returns can impact the overall value. This sequence of returns risk is something you should discuss with your financial professional, because timing matters.

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Looking ahead, converting some of your assets to a revenue stream, such as an annuity with a lifetime income benefit or a dividend-paying stock, for example, could help fuel your retirement without the worry of running on empty. And when you do retire, will you be emotionally ready to spend your savings? Maybe not. Three-fourths of average retirees — as defined in terms of income and assets — saw their nest eggs remain the same or increase in retirement, according to the Employee Benefits Research Institute. Why? I believe psychologist Abraham Maslow might attribute it to being stuck at the base of his pyramid.

Maslow theorized the most fundamental human needs are physiological — air, water, food, clothing and shelter — and safety, including personal and financial security, health and well-being. A meaningful retirement should evolve beyond these needs at the bottom of Maslow’s hierarchy of needs. Unfortunately, the fear of running out of money in retirement continues to haunt a generation of Boomers.

If you are spending retirement days worrying about your savings, rather than comfortably spending your savings to self-actualize, you are not on the right path.

If I retired today, what would my new life look like?

Money aside, another vital commodity in retirement is time. After retirement, your new passage of time comes in daily doses in which you get an additional eight hours or more free. What could that look like? Sleep in, play golf, take up pickleball, travel or start a project. You could have an exciting start, but for many, after the retirement sugar rush wears off, managing the additional time can be an unexpected challenge.

If you have an intentional plan with purpose, your clock can be filled with reward rather than regret. Those who lack purpose in retirement have a significantly higher likelihood of experiencing a heart attack, stroke, Alzheimer’s disease, early mortality and other health risks associated with aging. It’s obvious that a financial plan is not a retirement plan. There’s a bigger picture in play.

And connections are key. Vivek Murthy, former U.S. Surgeon General to President Barack Obama, notes “Loneliness and weak social connections are associated with a reduction in lifespan similar to that caused by smoking 15 cigarettes a day and even greater than that associated with obesity.”

The pandemic ushered in a new era of carpe diem retirement decisions. But due to inflation, the economy or a general sense of unreadiness, some are undoing that decision, unretiring when possible. Or maybe they just miss making strong connections with colleagues.

Whether you push forward or turn back, reset or retreat, take a moment to talk through your retirement plan with your financial professional. That’s one decision you can’t go wrong with.

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Jackson® is the marketing name for Jackson Financial, Inc., Jackson National Life Insurance Company® (Home Office: Lansing, Michigan) and Jackson National Life Insurance Company of New York® (Home Office: Purchase, New York).

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This article was written by and presents the views of our contributing adviser, not the Kiplinger editorial staff. You can check adviser records with the SEC or with FINRA.

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Phil Wright leads a content development team for Jackson and is an award-winning financial writer. He started with the company in 1994 and focuses on the development and creation of digital content and thought leadership. He is a Registered Principal and Certified Fund Specialist (CFS®).