Ep. 193 – Navigating The Decision to Retire Now or Work Longer
Are you torn between retiring now or continuing to work? Working longer or retiring now isn’t just about money; there are many elements you should be thinking about.
Many factors might lead you to retire early or want to continue working even after you’ve reached retirement age. What, then, are these elements you should consider when navigating that decision?
In this episode of the Secure Your Retirement podcast, we discuss the elements to consider when deciding whether to retire now or work longer. We expound on financial readiness, health, personal goals, age, and long-term care.
In this episode, find out:
- Think about your financial readiness – your ability to retire or not.
- The different aspects of health you should look into when considering retiring.
- Evaluate your personal goals and interests and how they will fulfill you in retirement.
- Key ages to remember and the opportunities each can afford you.
- Think about your family and their reliance on your current salary.
- Avenues to evaluate when thinking about your healthcare and long-term care in retirement.
- “What’s equally important to savings is how much you’re going to spend in retirement; spending can make or break a retirement plan.”– Murs Tariq
- “Health insurance and dealing with our healthcare cost can be a significant in retirement.”– Radon Stancil
If you are in or nearing retirement and you want to gain clarity on what questions you should be asking, learn what the biggest retirement myths are, and identify what you can do to achieve peace of mind for your retirement, get started today by requesting our complimentary video course, Four Steps to Secure Your Retirement!
To access the course, simply visit POMWealth.net/podcast.
Here’s the full transcript:
|Radon Stancil:||Welcome back to our Secure Your Retirement Podcast. Today we’re going to tackle a topic that probably comes up in people’s minds. I think as we get into a new year, a lot of times people are thinking about their goals and what they want to accomplish. This particular podcast, this show, is about retirement. And so a lot of times people think, “Well, how do I think about this? How do I navigate this process or this thought light, this idea of, do I retire now or do I wait?”|
|Murs and I get a lot of folks in and they’ll be sitting there and they’ll say, “I’m 62. I’m trying to determine do I want to retire now? Maybe 64? Maybe 67?” And a lot of times when we go through that exercise, what’s interesting is people sometimes just want to know, can they? It’s not about, “I’m going to pull the trigger right now,” but they just want to understand that whole process.|
|This particular podcast episode is dedicated to, should I retire now? Can I retire now or should I wait? That’s the concept of what we’re going to do. So we’re going to take you through some of the things that we help people think through when they’re making that decision, things that they might need to compile, things that they might need to work through.|
|So Murs, can you get us started on that process of what we would take somebody through?|
|Murs Tariq:||Yeah, I think the first and most important to think about is your financial readiness. And what I mean by that is your actual ability to retire. There’s a lot of components that go into that. I actually was just in a meeting with a client who had a layoff that happened in 2022. And so for him, the question was, “Well, do I need to go back to work? Or have I done a good enough job that I can retire a little bit earlier than expected?” So these questions always come up, whether it’s due to a layoff or due to you’re just tired of working where you’re at and you want to be done and you want to start enjoying retirement.|
|But financial readiness is a huge part of that. And what that really entails is understanding what you have done to get you to this point of retirement or the concept of it, which is, “How much have I accumulated in retirement savings?” We’re talking about your 401(k) assets, IRAs, Roth accounts, taxable accounts, savings accounts, all those different things that we’re going to need, and use to draw on for the next 30 some odd years of our lives. Is that going to be sufficient enough?|
|And then I always tell people, especially in retirement when we don’t really have a salary coming in the door anymore, what’s equally important to savings is how much are we going to spend in retirement? I’ll tell you, spending can make or break a retirement plan. Because you can have all the money in the world, but if you spend it in a couple of years, well, it’s just not going to work out. So understanding your retirement budget. It should include the fun things too that you want to be doing. You’ve got your regular bills, we call those your needs, so keeping the lights on, staying fed.|
|Then you’ve got your wants, things that make you happy. And then you’ve got other things like legacy or gifting that you want to be doing throughout retirement if you’re so inclined. And so taking the time to understand, “What do I have to help me in retirement, and what am I going to spend in retirement?” Putting those two together that lets you actually start running the numbers or working with someone to help you run the numbers, to answer the question, “Am I financially capable of retiring today, or do I need to look at other options like continuing to work or part-time work or something like that?”|
|Radon Stancil:||All right, so we get that one out of the way and let’s talk about another issue or another topic, and that’s our health. Now I’m going to give you a couple of scenarios on this one. Couple of stories.|
|I had a person come to us who now is a client, been a client now for well over a decade. But when he came to us he said, “Here’s the deal. I’m 61. My health is not good,” in the sense that he was dealing with a lot of stress at work. And he said, “I need to figure out, can I retire now or do I have to do this for another few years?” But he was having some heavy anxiety, heavy stress problems that was causing heart issues, all those kind of things. We started working through the numbers. In reality, it made sense, he could afford to retire if he wanted to retire. And so when he weighed all of the pros and cons, he decided to retire. And today he would tell you it’s the best thing he ever did because his stress went low. He was able to just get a lot healthier.|
|Now, there’s a couple of different ways you could do that. One is you could retire from the stressful job and maybe do something that’s less stress, maybe work part-time, do a job that’s not about the money so much as it is just about doing something, maybe give you a little bit of spending money. So that’s one aspect of health is, you feel like, “Hey, this job, this thing I’ve got is actually creating more of a problem for me than a help. It’s really affecting my health.”|
|There is the other scenario where a person could come in and be talking to us and they go, “I really like my job. I am really healthy right now.” Maybe this person might be on the other spectrum. Maybe they’re 68 or 70, when most typically would be retired and they say, “I feel great. Why would I retire now? Because I still like what I’m doing. I’m still healthy and I don’t want to just go to this point where I don’t have anything to do.” We’ve had many of those occasions. And again, maybe the person doesn’t work a full-time job, maybe they do some consulting, maybe they work some part-time things there.|
|But because their health is so good and they love what they’re doing, they say, “I want to give it another three or four years, why would I stop?” And on those plans, what we do is we basically say, “Look, let’s monitor it year by year. There’s no reason to make a decision right now that’s life changing. Let’s just take it one year at a time.” So when you think about health, there could be two different scenarios. One, it’s causing me health problems. The other is, “I’m so healthy right now and I love what I’m doing. I want to continue to work.” Both of those can be built into an overall retirement plan.|
|Murs Tariq:||Another one that’s going to help you navigate the decision of retiring now or working longer is evaluating your personal goals and interests. I think this is a big one because a lot of times it’s all about, “I need to work so I can get to retirement.” And oftentimes we see that someone gets to retirement or is approaching retirement and they have no idea what they want to do after they retire. It was all about getting to that milestone. And then, “I’ll figure it out from there.”|
|Well, I would encourage you to start thinking about what you want to do in retirement before you actually get to it. One, so you can start planning it out from a monetary perspective and understanding how much is it going to cost, whether it’s going to be travel, whether it’s picking up certain hobbies like golf or whatever it may be. And so being able to understand that, and understand is that going to fulfill you in retirement?|
|And so some people, like Radon was saying, they love what they do, and their work gives them some sense of purpose. They like waking up in the morning, they like going to work. And some people work just to get the paycheck. There’s nothing wrong with that either, because we’re all working towards a goal, whatever that goal is. And so if you have a good sense in your mind as to why you’re working and what your overall goal is in life and what you want to get out of retirement, that’s going to help you think through, “Well, if I can retire today, do I actually want to?” And that helps you start thinking through all the ifs and, what ifs. And, “If I do actually do retire, what am I going to do next?”|
|Radon Stancil:||All right, the next one is age. The reason why we bring this one up is because age gives us certain opportunities. Let’s walk through a few of these. And this list is not going to be all inclusive, it’s just some key areas.|
|The first age that a person may need to understand is 59.5. Why? Well, I can’t take money from an IRA prior to 59.5 without a 10% tax penalty. So if I’m sitting there, maybe I could have a humongous 401(k) IRA scenario and I go and say, “I want to retire at 55.” Well, I’ve got to be careful there as to where I’m going to pull money from 55 to 59.5, because I could be incurring this 10% penalty. So you got to think that one through.|
|Another key age is 62. Well, why 62? 62 is the very first time that I could start Social Security. That’s the first age that could take early Social Security at a reduced rate.|
|Another key age is what’s called FRA, full retirement age. And that is when I get the full retirement amount that I would get from my Social Security. So that’s going to be bigger.|
|And then another max a or an age is age 70, and that’s the maximum that I can get from Social Security. So all of these things come into play.|
|Another key age is age 72, about to be 73, which is when I have to take required minimum distributions from my IRA. So let’s say I was working and I love what I’m doing, but all of a sudden now I know I’m going to start getting this other money from my IRA. Well, that’s going to be a tax situation.|
|Oh, another key age, sorry, I forgot one. Age 65. And the reason why 65 is so important is because that’s when I get Medicare and healthcare coverage, which we’re going to talk about in a second is huge when it comes to retirement planning. Because we’ve got folks right now that let’s just say are 63, 62, a couple, two people having to buy their own health insurance, but prior to Medicare, it’s over $2,000 a month. So that’s a very big bill that we’ve got to consider if we’re going to retire prior to 65. Once we turn 65, Medicare and our healthcare cost is much more manageable at that point. So those are some key ages to keep in mind.|
|Murs Tariq:||Another one is think you want to think about your family and how reliant are they on you for that salary that you’re bringing in the door. It may be that you have a two income family, and the family’s going to be okay by dropping one of those incomes. Maybe that you still have kids that are financially dependent on you, or you have elders that are dependent on you, like your parents that you’re trying to help with whatever issues that they may be dealing with. And so losing that income by retiring could present some issues. You have to ask yourself, “Am I in a position to be able to do this or do I need to stick it out so that I can continue to help the people that I’ve committed to and that I love and I want to help them out?”|
|And so that’s something to evaluate too. Because we always go into this idea of taking care of people, but we don’t want to take it to the point where it’s going to make us incredibly unhappy, or not feeling fulfilled. And so it’s a fine balance there we want to think of, but we would definitely want to consider our family and our obligations to the commitments that we have made, and whether or not retirement is going to allow for that or not.|
|Radon Stancil:||All right. The final one that we’re going to talk about is a big one. We’re going to have to break this one down into a couple of different areas, but it’s health insurance.|
|Health insurance and dealing with our healthcare cost can be a significant cost in retirement. So a lot of people have worked for a company, they have their healthcare coverage at least subsidized through their employer. If you decide to retire early, very few companies today provide retirement benefits for healthcare. Most times when you retire, you no longer have the company health insurance. But there are some bridges that you could think through.|
|One is called COBRA. COBRA is the health insurance program that I get through my employer, but now I have to pay for it on my own. Some companies offer health savings accounts in all essence where I could have built up a balance into this type of account where I can use those funds to help bridge me on those couple of three years until I turn 65. We already mentioned at 65, I get Medicare, and that’s a very, very big benefit.|
|That bridge, if I’m trying to retire prior to 65, is a considerable bridge that we’ve got to think through. So in the retirement planning process, Murs and I, when we’re building a retirement focused financial plan, we are really looking at that healthcare scenario. Now if it’s only a couple of years, it’s usually not going to change the retirement plan that big.|
|But now there is a caveat, and I’m just going to let Murs cover this one real quick, is how we look at long-term care. There’s a couple of different ways to look at that. There could be self-insured and insurance. So can you walk through how we consider long-term care?|
|Murs Tariq:||Yeah, so long-term care is something that is expected to be needed somewhere later in life. And the question is, “Do I need long-term care insurance, or can I afford to self-insure?” So goes back to the first thing that I said is financial readiness. We want to incorporate when we’re running the numbers of the ability to retire from a financial perspective, we also want to be thinking about the, what ifs. One of the, what ifs is, “Do I still need to maintain life insurance?”|
|Another big, what if, is this one of long-term care? “What if I do run into that scenario at age 80 where I can’t perform some of the activities of daily living and I need additional assistance? Can I afford to pay for it myself?” Those bills are extremely expensive and they’re only going up with the way that the healthcare system is going.|
|And so you can look at it and say, “I can afford to insure myself, and that just may mean that my beneficiaries get less.” Or you could say, “Well, let me transfer some of that risk to an insurance company.” The transferring of the risk to insurance company is really done in one of two ways.|
|One, you’re paying traditional long-term care insurance, which means you’re paying premiums. So you’re adding a line item to your budget. If you retire, you have no income coming in the door. So can your budget sustain premiums into that type of policy?|
|The other option is to basically reallocate some of the funds that you’ve already saved. So the point here being that you have to have already saved the assets to reallocate them into this long-term care type of hybrid insurance plan. And so it comes back to, “Well, have I done a good enough job today to cover this future expense that may be down the road that could be very, very costly.” And so it’s something that you definitely want to evaluate on the long-term care side of things.|
|Radon Stancil:||All right. This list is not exhaustive. It is just things to get us thinking through. Just as a quick recap, we talked about financial readiness. Number two, our actual health, how is it? Number three, our personal goals and interest. We then talked about our age, because there’s different considerations there, family considerations, and finally a whopping one, which is health insurance.|
|We hope that that at least gave us a little bit of a guideline of what to think through about whether or not I can retire now, or should I wait, or what are my considerations there. By the way, we have a blog written on this particular episode. You can go to our website, which is pomwealth.net. Go to the blog page. It’s all there, all the notes. You don’t have to worry about making those on your own. You can read about it. We have a lot of people who tell us they love to go read the blog after hearing the podcast.|
|If you would like to talk to myself or Murs, go to the website. Top right-hand corner says, “Schedule call.” Our calendar comes up. You can hop right on there. We are glad to talk to you. It is a complimentary 15-minute phone call where we can just walk you through some of these concepts and ideas.|
|Thank you so much for listening. We look forward to continuing to feed you this information all throughout 2023. We’ll talk to you again next Monday.|