How do you decide when you are ready to retire? For some, it is when you reach a certain number of dollars – your ‘F-Off’ number that represents financial independence. For others, it is a specific date, Come hell-or-high water, they are going to walk off the job on the date they’ve always planned – age 55, age 60, or any age they want, regardless of how much money is in their retirement savings.
I’ve been chatting with a lot of folks about their lately and it is interesting to hear people’s retirement plans and if they are driven by DOLLARS or DATES:
- DATE: One friend who has young children bases his thinking on his kids ages. He and his wife have young children and their plans to retire are all based on their ability to get their kids through high school and into college. That’s a ways off at this point, but that’s what they feel they need to do as parents. Recently I published an article that explored how old people’s kids were when they retired and he found that surprising.
- DOLLARS: Another couple we know plans for early retirement just as soon as they can. Their kids are already off to college and they have sold the family home and already downsized into a home for retirement. The money they saved will get them to true financial independence and retiring early (FIRE) in just a few more years – maybe even faster than that.
- DATE: A former coworker has just started his countdown toward early retirement at age 55. He is about 18 months away from his 55th birthday and was happy to see that it falls on a Friday. I also retired on a Friday (April Fool’s Day) and shared with him over lunch how I planned out my final months. He’s excited!
- DOLLARS FIRST: A younger friend isn’t sure when he will hit his number, but he and his wife have been diligent savers since they started working. He is just about 40 years old now and he is not interested in a date, but just a number. He comments that having a laser focus on an aggressive number gives you flexibility later. Once you reach the number, you can decide to keep working or not once you get there.
- DATE REACHED: At lunch last week, I met with someone who isn’t quite on her dollar number, but feels like her retirement date has come due. She is ready to make the jump to early retirement and string together some enjoyable hobby jobs that will bridge her through to where she needs to be financially. There is some risk involved, but she is ready to trade future savings for a life of freedom now. She doesn’t want to get caught in the ‘one more year’ mode of working and delaying retirement.
- DOLLARS NEEDED: One former boss who is more than 10 years older than me would like to retire soon, but hasn’t gotten to his number. At a recent event, I met his wife for the first time and she was positively jealous that I exited MegaCorp before I turned 50. “Retirement’s not yet in the cards for us,” she said, lamenting the fact that they hadn’t been better savers when they were younger.
- DAD’S DATE: I worked with a woman at MegaCorp who retired two years ago fulfilling a goal to retire five years earlier than her father did. She said he had died of a heart attack soon after retiring and never got to enjoy himself. For her, the date was everything because she saw the risk of dying early as very real. I talked with her on her last day at work and she was very excited to get onto her next chapter.
- DATE OPEN-ENDED: One last friend had an interesting approach to the question about dollars or dates, which was that his aim is to maximize his number as much as he could, until he inevitably gets laid off (his company isn’t doing well). He feels that his kids do not have the same economic opportunities that he has in his life, so he wants to build intergenerational wealth to help them out. If you are wondering, he is not overly political and his view didn’t have anything to do with the recent Presidential election.
For us, I had a plan to try to retire by age 50 for quite a few years. At first, it was just a ‘nice to dream about’ DATE, but as I got into my 40s, it also became an actual dollar and cents goal. The date was still more important to me than the dollars at that point, although I also spent a little time calculating the exact number of dollars that would also mark the finish line to financial independence. I wrote about the fun of picking a date plan in this post, from my ‘FIRE Milestones’ series.
I switched companies when I was 46 and felt like I was close to my dollars number. A few months into my new job, I recalculated and realized I had definitely made it. That said, since I hadn’t reached my DATE yet – my son was still in high school – I kept working and ended up building a little financial safety cushion. Eventually, I exited a little earlier than my DATE goal, and a little over my DOLLAR goal.
As you can see from the number of examples I’ve discussed with people in the last couple weeks, there is no better approach when considering dollars or dates. Calculate both and you’ll probably know the best path for you when you cross one of the two possible lines. Are you planning for a dollar amount or absolute date for your retirement?
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