What is the best age to Retire?

What every working person should ask and know.

You’ve probably encountered those ultra-expensive items whose price was never openly stated. Jewelry with no price tag, hotel rooms whose rates are buried five pages deep, menus where there is no cost displayed against the dishes. The idea is that if you have to ask, you can’t afford it.

Similarly, if you have to ask when can you retire, you’re not ready to retire.

It’s kind of like finding that special someone in life. People ask how will you know, and the answer provided by those who did manage to snare that rarest of rare beings will tell you – you’ll just know.

Therefore, when you’re ready to retire, you’ll just know.

The key philosophy underlying my perspective is that Retirement is not the age where you quit your job and stop working. That may have been true a couple of generations ago. Retirement then was the year when Dad started staying at home and watching TV for six hours a day. Instead, now, Retirement is when you close down your current life and start a new one, without dependence on a regular salary. This can happen at the age of 65 or 45, as long as you’re ready to start a new life.

And like losing your virginity, that readiness is the most important key to how good it proves to be. Sure, there’s also financial security, but you’d be surprised by how little this impacts your decision to retire. Financial stability is actually well within the reach of many of us, but it becomes the reflexive socially-acceptable excuse to not change status quo.

Do a rough addition of all your expenses last year (though don’t include stupid extravagances like that guitar that was strummed twice, or whatever you bought from the Apple store.) Then add up all your current savings and investments (except for any house you own). Divide the Savings with your Expenses and you’ll get a rough estimate of how long your savings will last. Now take a deep breath, and try not to cry on the keyboard; it’s repair will set you back further.

This is of course a very rough calculation, but now at least you know where you stand, and you know what you need to do if you’re serious about putting up your feet earlier than your Dad could. By the way, I haven’t included typical future events like kids’ college expenses, medical emergencies, etc. I want you to become a young retiree not a depressive alcoholic. But do factor in those possible events too please.

The good news is that you’ll figure it out. Millions, if not hundreds of millions, manage to do this every year. Give yourself some time and start with one step at a time. Maybe something small like saving a few more dollars every day, or cutting down on eating and drinking out. Gradually, you’ll find the confidence and ideas to do more and you’ll be wonderfully surprised by how fast the effects of even the smallest steps begin compound into wealth, and not just money. There is a difference.

Now keeping aside financial stability for just a few minutes on the assumption that you’ll do something about it (or let me know in the comments column if I can help), let’s get to the actual cake under the icing. Continue reading.