For some people, it’s like a sixth sense; they know exactly when it’s time to go. For others, deciding on when to retire isn’t an easy decision to make, particularly if they haven’t made robust plans for a post-retirement income.
Determining the right time to retire is no easy task. There is more than one decision to be taken in fact, and you should take good advice about the many issues that retirement brings up. For example, if you have a rental property, is it better to keep or sell it? Have you taken advantage of tax relief on your pension? Have you thought about how you’ll live on your pension which is likely to be considerably less than your salary?
Instead of hoping for divine intervention, these seven signs may convince you that it isn’t the right time to retire.
1) You’re too young and you’ll live too long
I don’t mean to flatter you, but just because you’ve reached 60 (if you work in the public sector) or 66 (for those in private industry), doesn’t mean you should automatically clear out your desk and graciously accept your carriage clock. Retiring at retirement age may cost you dearly. The numbers are pretty compelling to work an extra few years; we are living longer and many retirement funds are still reeling from the market crash in 2008. If you are fortunate enough to have a job you enjoy and can still contribute, then it may make sense to clock in for another while.
Remember, retiring early means your pension fund must last longer, assuming you will live to enjoy your twilight years. And If you are purchasing a guaranteed pension (annuity), the younger you are, the more expensive it becomes. Kicking retirement down the road by even two more years can make a big difference. Who needs a clock anyway – you tell the time using your phone these days.
2) You have financial obligations
Kids in school or college, four years left on the mortgage and a credit card bill. If you are finding it difficult to keep up with your financial obligations on a full wage, what will it be like on a pension? If the car is rattling and the roof of the house needs repairing, don’t hand back the work ID card just yet.
3) You’re counting on an aggressive stock market stance to make up for lost time
If your pension fund isn’t quite large enough to sustain you through retirement, don’t expect stock market returns to make up the difference. The markets can be very volatile and if you choose the safest option and go with a low risk fund, the returns are generally lousy. You may need to give the markets (and your fund) a few more years to recover than originally anticipated. Those most successful in retirement are the ones who have made contributions to their retirement pot on a regular basis. You want to be retiring debt-free and with few costs other than day-to-day living expenses.
4) You live to work
The boss might be an ass, but if you are retiring for the sake of it remember that even the dull conversation around the water cooler might be more attractive than going for long, aimless drives or going to every funeral in the local church because it’s something to do. We tend to have a rose-tinted view of retirement and you may even be fully prepared financially, but unless you have plans – a hobby, a project, voluntary or part-time work – you could run the risk of the trip to the local shop for the paper becoming the highlight of your day. You need to have a meaningful idea of what you intend doing with all this free time.
5) Your spouse will have to get to know you again
Your partner should be in agreement with your decision to retire as you both need to prepare for the transition. If your spouse says ‘Don’t retire just yet’, it may not be that they don’t want you around the house, but there may be an underlying financial concern (it could also be that they don’t want you around the house – see point 4 above!), and if that concern isn’t identified, it may lead to further stress. Marriage counsellors tell us that the first year of retirement can be the most difficult. You need to get used to spending a lot of time together if your partner is retired or doesn’t work. It’ll take adjustment until you get into the groove, find your feet and get used to your new circumstances.
6) Your plans to work part-time don’t pan out
Many younger retirees opt for retirement in the hope that they can pick up a little stress-free job, part-time job in their locality. The reality is that with high unemployment (almost 15% in 2012 when this blog was written originally), you just can’t bank on getting a part-time job.
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7) Your rainy day fund has relocated to a warmer climate
We live in interesting times – by interesting I mean expensive. When you take into account the septic tank charge, property taxes and levies, and the fact that a contributory pension no longer guarantees a comfortable income in retirement, your rainy day fund becomes more important than ever. What happens if you suffer an unexpected expense in retirement? A medical emergency? Damage to your home due to freak weather? Suddenly the dream cruise around Africa on which you blew your savings looks like a poor investment. If you don’t have a healthy savings fund, it might just be advisable to renew your commuter ticket for another few years while you get that fund in place.
We are always on hand to help and guide in whatever way we can. Get in touch if we can help.
Hi, I am Bob Quinn, a fee-only independent financial adviser in Naas, Co. Kildare.
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