When can I retire?
People want to know when they can retire. When I do a quick search on "most googled personal finance questions", the most popular questions are "when can I retire?", or "how much do I need to retire?".
As with most personal finance questions, the answer is: it depends.
But that's not a satisfying answer. They would like some hard numbers to target and start (perhaps continue) to work towards.
Just give me the answer, already. And, don't give it to me in a spreadsheet that I can't understand. Just give it to me.
Trust me, I get it. Here's the issue.
The type of retirement that may make sense for me may be totally different than one that makes sense for you. Each one of us has a different idea about how we would spend our time when we no longer need to work for a paycheck. The trick is trying to get a clear idea of what that fulfilling life in retirement is meant to look like for you.
How do I set my retirement goals?
Many (perhaps most) people don't have clear financial goals. And the ones that do have them very rarely have them written down. If they are written down, they are rarely updated.
Why is goal-setting so hard? I don't know. But, I do know that it can be hard to think about the really long term. I'm 38 and I have a hard time imagining my kids going to college/university. That's just 10 years away from now for our oldest boy Luke. Yikes!
So, what I offer you is something that has worked well for me when sitting with clients and trying to help them set their financial goals. There are no calculators or software involved. You can do this on the back of a napkin or with a notepad. I suggest sitting down with your significant other and carving out 20-30 minutes without any distractions.
First, a Big Question
Imagine yourself on the first day of your retirement. The alarm clock didn't go off, because you have nowhere to be and nobody is waiting for you.
Also imagine for a moment that money is no object.
What would you do?
And then from there, expand the questions to:
Where would you go? Who would you be with?
Write down your answers in point form.
Ideally this identifies for you what your passions and interests are. Popular items here are things like destinations you want to travel to, hobbies you want to spend more time on. And, more importantly, you identify the friends and loved ones that are most important to you that you want to spend more time with.
Next, Some Time Travel
From there, try visualizing your retirement as it progresses through the rest of your life. If you retire at 65, retirement is going to be a long time. In fact, if you are healthy, it's possible that you will spend nearly as much time in retirement as you do working. So, having a vision for how you will spend that time is a good place to start planning.
So, for someone retiring at age 65, the visualization goes like this.
Imagine you are retired at 65. .How do you see yourself spending time between 65 and 75? Write down your answer in bullet form.
Now, imagine how you see yourself spending time between age 75 and 85. Write down your answers.
And now, 85-95.
And, since life expectancies keep going up, why not try 95-105?
This part of the exercise may help you realize that retirement is going to last for a very long time. This part of the exercise may help you think about the types of activities you might pursue to keep you busy and active. Instead of a full retirement, you do some part time work consulting in your field?
Perhaps a day or two per week volunteering for a charity that is important to you? Or, maybe instead of retirement you want to pursue a longer career that is different than the career that you are in now?
No wrong answers here. It's your plan, and that's the beauty of it.
Bringing it together
Hopefully this exercise has helped you create a clearer picture of what your ideal retirement looks like for you. Now, you are in a much better position to start putting some pencils on paper and sketching out the numbers.
Knowing your goals guarantees that your plan will be just for you, and nobody else.
Please consult with your financial advisor, tax professionals, and legal professionals before making any decisions.