When is The Right Time to Retire?

I hear this story so often – she can’t wait for him to retire so they can go travelling together. She wants to cruise down the Rhine River and go on a tour to the Great Wall of China, but he doesn’t want to leave his business. Sure, he has his son there, ready and willing to take it over but still – he can’t quite let go. He worries about whether the business will run smoothly without him. Can his son handle the responsibility? Of course, there is another version of this story. This time it is he, who is sick of working nine to five, sick of riding public transport and going into the office every day. He can’t wait to retire so he can play more golf, sleep in, see more of his adult children, but she has trepidations. How will she handle having him at home every day? How will she find time to be alone? Will he just end up getting under her feet? Is this really the right time for him to retire?

That’s the million dollar question, isn’t it? When is it the right time in your life to retire? And how are you going to make retirement work with your spouse? They are serious questions. I want to devote this blog, and my next blog workshopping some suggestions.

How long should you work for?

Most Australians need to keep working after the retirement age so they accumulate enough superannuation to support them in retirement. Other lucky individuals have the funds to retire by the time they are thirty. Take a look at a list of Australia’s young millionaires and you will see many people in this position: https://www.afr.com/leadership/afr-lists/young-rich/financial-review-young-rich-2017-20171020-gz4w8i Many of these people have amassed their fortunes through online businesses. But should anyone drop out of work in their thirties and live an idle life?

There is no right age to retire.

When it comes to retirement, there are many subjective factors that vary from person to person. You can’t fix an age for retirement. But how do you tell when the time is right for you to make the transition from work to retirement?

The first question has to be whether you can afford to retire. That is a hard one. You don’t know how long you will live. You can’t be sure what expenses you’ll incur in the future, but there are some basic questions you can ask yourself. Have you paid off your house? Are you still paying school fees? Will your children call on you for financial help in the future? All those variables must be considered.

Think creatively about money

I would suggest you grab a pen and paper and start working out your retirement budget. What will your expenses be? Will you need extra funds to cover the costs of your health care? Do you have health insurance? It pays to have some money tucked away for poor health in later years. You may find you need a knee-replacement but there is a long wait time for public patients. Yes, there is so much to consider. Do you expect to get a full-pension or part-pension? Have you spoken to Centrelink? You may find that you have too many assets and you will only receive a tiny pension. I know a lot of people who have been caught out this way!

Needless to say it’s a good idea to have paid off your mortgage by the time you retire. Again, I’m not a financial adviser. You definitely do not want to be retiring with high-interest debt! You can’t quit work if you have credit card bills.

You can also be creative in how you handle your assets. I know many retirees sell the family home and move into retirement villages. But what about using some of your super to turn your large-family home into two units? Would the council allow it? You’d need to talk to planners and other professionals, but it is just a thought! That way you are not just eating into your super, but using your super to establish an ongoing wealth stream – rent from a new unit attached to your home. I am not a financial planner, but I’m just saying think creatively about your future. I know retirees who often have a spare room advertised on Air BNB. They love hosting guests and getting to know people from around the world and Australia, and this generates some income. How can you use your existing assets to generate money in retirement? Start thinking creatively about that sooner rather than later.

Also be aware that research shows that retirees do not spend less than working people. Young retirees tend to spend more on leisure activities (like sports and holidays). Older retirees spend more on their health. This can include having to redesign the house for a wheelchair.

Don’t assume you’ll find a part-time job

Be aware that jobs are hard to come by. You may be very senior at work, and think that when you retire you will easily find a fun part-time job that will give you a bit of pocket money. I’m afraid that may be more challenging than you realise. Good jobs are often hard to come by. Also you might face discrimination because of your age. Even though you have a wealth of experience, you’ll find many bosses just hire younger people. Your professional background may even work against you. You could intimidate potential bosses.

Have you considered running a franchise in your retirement? Apparently the pet sector is the fastest growing sector of small business in Australia. Would you like to run a pet grooming service? What are your passions? Have you thought about how you could turn your passion into profit?

Some retirees don’t need the money from a part-time job, but want to work for the social aspect. Have you considered volunteering? I know retirees who help with Meals-on-Wheels and even push wheelchairs around at a rehabilitation centre. They love it, and find it much more rewarding than paid work! Also you can volunteer to work overseas in a third world country for a year or two. I think that would be incredibly exciting.

Money is not the only consideration when looking at retirement

After the question about being able to afford being retired, the big question is – are you psychologically ready to leave work? How will you occupy your days? Do you have a large circle of friends and family to keep you socially engaged? If you love your work, you may find that your life lacks meaning when you retire. Work gives many people social status and a sense of purpose. How will you feel when you don’t have that? You may need to find new opportunities that give you status and validation. Are you a member of a service club like Lions or Rotary? Have you thought about running for a spot on your local council?

I want to continue this discussion on retirement in my next blog, but first let me warn you that you should never let your partner or children or other family members persuade you to retire if you are not ready. You will only end up resenting them later. You may have all the money you need to leave work, but love working and just don’t want to give it up. That is fine, provided your family agrees with you … if not, you need to invest in some serious conversations. More on that in my next blog!