When Should You Retire?

Retired with an antique car—1927 Flint Roadster

When I ask people why they retired, or if still working, when they will retire, I often hear one or two reasons. Almost no one tells a complex story. The particular experiences vary among people, but not the degree of complexity.

And when I look back ten years to my retirement, my thinking was also simple. Work was growing more unpleasant, my wife and I had a little more money saved than we figured we needed, and I dreamed of one retirement adventure after another.

Maybe a good way to plan a retirement date is to think about three factors that stand out for me and many current retirees:

    • Work—is it mostly pleasure or pain?
    • Retirement activities—what will you do with all that time?
    • Money—how much is enough?

Work and Activities

One high-profile 69-year-old lawyer I know, we’ll name him Bill, is afraid to quit work. He suffers much stress, and he would like to quit. His clients are private people applying for government permits or variances, so there are plenty of events affecting his clients’ welfare over which Bill has little control. But his clients want favorable decisions, not excuses. Although he’s earning hundreds of thousands of dollars per year, his wife likes to spend money. He has money saved, but not enough to keep his current living standard. Bill’s an alcoholic, and he worries that if he quits work, he may drink all day. His only real hobby takes him on an occasional hunting trip, but he doesn’t think he could hunt all the time. On all three factors, Bill is stressed.

Another fellow I know, John, is a skilled physician at the top of his game. He definitely wants to continue working into his early 60s, but then he will retire. He and his wife live well but not extravagantly. He figures he’ll have about twice as much saved as he’ll need. His children are grown and out, and although he helps them now, he believes they are on trajectories toward self-sufficiency. He was an active hiker, camper, and motorcyclist when he was young, and he has interests in hunting, traveling, and boating. John is well prepared.

The three factors don’t always point to the same decision. A person may be stressed at work, yet afraid to face the free time of retirement. Sometimes professional people fear losing status—they are in charge at work, and the fear of being “ordinary” steers them away from retirement. Or a person may have plenty of things to do in retirement and favor leaving work, but he may not have enough money.


I recommend a simple procedure to estimate an adequate amount of money for retirement. If a person is not planning major life changes (like moving, traveling full-time, starting a business), she may set her desired retirement income equal to her current working income. This assumption works as well for a couple. Any major life changes must be estimated separately.

Pre-retiree trying out the retired life

Some writers say that replacing 75% of working income is also workable. That is probably true. But if a retiree and her family will have 100%, she has a cushion to soften the unexpected.

A pre-retiree can estimate her Social Security income and any expected pension, and add them together. Subtract that total from her hoped-for retirement income, and multiple that difference by 25. That is a rough estimate of the savings she will need.

Why 25? Because blowing up the needed income by 25 corresponds to using a simple 4% withdrawal from retirement investments. As we have written previously on this blog, a simple 4% withdrawal rate from retirement investments is likely to ensure a retiree will not outlive her investments.

For example, if a person is earning $60,000, and if she expects a pension of $30,000 and Social Security income of $18,000, then she will need $12,000 per year from investments. A nest egg of $300,000 would be enough.

Without the pension, she will need $42,000 from investments, or a nest egg of $1,050,000. Less than 10% of Americans have that much saved wealth. Without a pension, she may better aim for replacing 75% of her work income. In the example, she would then need $45,000 of retirement income, and $27,000 from investments. A nest egg of $675,000 would suffice.

If a reader wants a more complicated approach, look to the Internet. Type “retirement calculator” into a search engine, and the resulting list will contain many calculators from reputable websites.


If a person in her 50s, say, examines her life in relation to the three factors and sees mostly problems, then she should devote effort to what she can manage in the present—improving her work experience, trimming expenses and saving more retirement money.

For pre-retirees whose principal worry is what to do in retirement, they might wisely set time aside for trying hobbies or other activities. If a person makes that effort over a couple of years and finds nothing of real interest, then perhaps continuing at work is the best option.

If money is a big issue, then use similar thinking to that illustrated above: based on your current savings (use 4% of your savings) and expected pensions or Social Security, estimate your retirement income. Then try living on that income for a year while still working. If you can’t do it, then continue working, cut spending and increase savings.

Admittedly, the recommendations here compose a simple approach to retirement planning. Some people may lead lives calculated in real detail, but most don’t. Most people, it seems to me, assess some major factors, chart a reasonable path, then adjust the details as they go along.

A new Beatitude for those near or in retirement

4 thoughts on “When Should You Retire?

  1. Simple and to the point, as usual. Before pulling the plug and retiring, I spent many, many hours with spreadsheets and a lot of online retirement planning software. Boiling it down, it all came back to the same magic figure you give: 4%. The day I figured I could live on Social Security plus 4% of savings, I gave notice.

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