Helping Clients Determine When They Can Retire

Advisor Perspectives welcomes guest contributions. The views presented here do not necessarily represent those of Advisor Perspectives.

Can I afford to retire? Is it the right time? Here is how I answer those questions from my clients.

Those questions are on the minds of clients everywhere, from those riding the subway to driving in rush hour traffic, even millionaires swilling their chardonnay on private jets. When clients ask this question, they are like the millions of people who get up and go to work every day, hoping that one day there will be an easy answer.

While there is no one magical answer or solution, I have educated myself on a few factors to make an informed decision. Let me state a few aspects to consider beforehand to alleviate the worries that ascend with this question. So, can I afford to retire?

When I meet with clients, I always encourage them to begin by envisioning their retirement goals. For example, some may wish to retire gradually and continue working part-time in a consulting capacity or start a new business. While many people transition to full retirement smoothly, I have often observed many retirees seek to fill the void in their life from no longer working. I have encountered many clients approaching retirement who choose to either postpone retirement or work reduced hours in their job before ultimately transitioning to full retirement later in life.

One of my clients (unmarried with no children) opted for an early retirement at age 60. He could retire comfortably, but he chose to continue to work and started his own beer distribution business. This was his “retirement transition,” as his previous job demanded strenuous work. His retirement goals included lifestyle choices such as traveling for leisure and moving to another state (a “snowbird” client). He had long-term planning goals for gifting and estate planning. That is how I envisioned his retirement goals.

The next stage in planning is to develop a retirement budget for living expenses. This is crucial, as it determines if one is comfortable to retire early. Several factors, such as longevity, net worth, debt, health and medical expenses and income resources must be considered. There are other factors, based on personal circumstances and retirement goals.