Jacob: Is now the right time to retire? If you can answer yes to these five questions, you might want to start thinking about it. Hey there, my name is Jacob Duke. I'm the host here of the Retirement Answers podcast, and I also own a retirement planning firm, where we help people just like you plan smarter so you can retire better. And in doing my job every day, I get to see the good and the bad, some of the wins and the mistakes of people that are trying to retire or people who have retired.
But one of the most heartbreaking mistakes that I see is whenever people retire too late. And you might be thinking, Jacob, how's that possible? How can I retire too late? Whenever I work more, I just have more money saved than I have more money to spend, right? Well, that's right, you would have more money, but what are you missing out on to have more money?
What about your health? What about your family? What about the vacations that you've put off because work's been so stressful or so busy? What about all the things that you might not be able to do if you were to work too long or work longer than you otherwise need to? Because working too long might end up causing you to miss out on some opportunities or some of the fun that you long to have with your family or with your loved ones and doing the things that you've always wanted to do.
But you're maybe a little bit scared to retire because the numbers aren't perfect just yet. So today, want to walk through these five questions. If you can answer them and you could say yes to them, it might be a good time for you to retire. Number one is the question that everybody has on their minds and it's do you have enough? Now, this is maybe one of the hardest questions to answer because it is so personal to each person.
Now, are different rules of thumb out there, which I don't really agree with at all, but those things might include the 4% rule, which is, in my opinion, not so much a rule. It's just a calculation and a mathematical equation that says, if you spend a certain amount of money, based on your starting account balance at the beginning of retirement, if you spend that amount plus inflation every single year over a thirty year time horizon, if you invest your money in a certain way with the appropriate balance between stocks, bonds, cash and different assets, then you won't run out of money. And that might be true from a mathematical perspective, but it doesn't really matter because what if 4% of our portfolio isn't actually enough to meet our needs in the first five years of retirement or what if 4% of our portfolio is more than we need in the later years of retirement? So the 4% rule just tells you what you can do sustainably year after year, but that doesn't mean that's what you should do. Now, another rule that's out there is some multiple of your income.
So if you are about to retire, you might need anywhere from eight to 10 times your current salary in order to retire successfully. And I don't like this one at all, because everything in retirement in my opinion is not based on what you've been earning throughout your career. It's based on how much you're gonna spend moving forward. So for example, if you've got a million dollar salary here in 2025, and you're gonna retire in 2026, do you really need 8 to $10,000,000 to retire successfully? The answer is, is maybe or maybe not.
And it's really not dependent on how much income you've been earning, it's really dependent on how much you're gonna be spending moving forward. So these different rules of thumb, they might get you in the ballpark, but they're not gonna get you extremely close. What you've got to do instead is actually just look at your situation and your specific needs, because if you retire at 60 versus 68, your income needs in the early stages of retirement are gonna be completely different from that person who retired at 68, because at 68, likely Social Security will be kicking in fairly quickly. You wouldn't have at least a five year gap between Medicare and having to do private insurance. So all the variables are changing based on your circumstances, and you've got to build out a retirement income timeline to know where you're gonna be pulling money from every month, how much you need every month, and is that sustainable for the period of time that you're needing it?
Because what I found is that as you age in retirement, what you're gonna need is less money from your portfolio due to maybe a pension that turns on, maybe social security turning on, those different fixed income sources are going to take at least a portion of your income need off of your portfolio, which reduces the stress that can happen on your investments. So you've got to take some time to really analyze this and typically I'd recommend to run at least a Monte Carlo simulation. Now I also have aversions to Monte Carlo simulations, and that's just whenever you take your data, you input it into a financial planning software and it gives you some probability of success. That information is helpful. The probability of success is helpful, but it doesn't tell you how to retire, just tells you whether or not you can or cannot sustainably based on all the different inputs that you have.
Now, here's the key, you gotta make sure your inputs in that particular planning software are accurate. If they're not accurate, it's garbage in garbage out, and it's not helpful at all. So that's what you have to do, you gotta understand what your expenses are gonna be, you got to understand when they're gonna be happening, are you gonna have a front loaded, really high cost of living early on in retirement, maybe you have to replace a roof on the house, maybe you've got to buy a new car, maybe you are relocating and it's gonna cost some a little bit of extra money to do that. Are There different things in your life that you've got to time out and plan out and say, when are these things going to be happening and how much extra money on top of our base living expenses are we going to need? And this brings up how I like to build your retirement income needs.
You've got to know two numbers. The first number is what is your baseline expenses? What is your need to have? For some people, it's $2,000 for other people, it's $8,000 You've got to figure out how much it costs you to get to the next month on the on the bare bones budget. So how much food you need, how much gas you need, whether you have a mortgage or not, any sort of debt payments you have to make, what is the minimum amount of money you have to have every single month to make it to the next month.
Now, in addition to this number, you've got to know your want to have number. So this is how much you would like to spend or how much you would need to have to maintain your current lifestyle if it's above basic standard of living. So for example, your need to have number could be $5,000 every single month, but your want to have number could be 8,000. So what I like to do there is I like to figure out those two numbers because it's not until we know those that we can establish really a range that we can operate within. Because here's the thing, there's a difference between being able to retire and being able to retire the way you want to retire.
A lot of people can retire today, it's just not gonna be the life that they really dreamed of, because they're not gonna have enough money to spend or enjoy or go travel or do the things they've been putting off and want to do. And so you got to know these two numbers and say, can actually make it on my portfolio at 5,000 a month, but can I make it on 8,000 a month of spending? And the answer might be yes or no, but you got to analyze this for yourself. If that answer comes out to yes, I can meet all my basic needs, I can get my want to have number and actually have leftover for additional random stuff that might pop up, you really might wanna think about retirement if those numbers are lining up and the math is working out. And this brings us directly into the second question you have to ask yourself.
Are you ready to retire? Like, are you tired of working? Do you wanna stop? Or do you enjoy it? Are you fulfilled by your work?
Are you fulfilled by your career? Is it something that you wanna keep doing even though you can retire? Because even if the numbers line up and the math does work and you can retire, doesn't mean you always should, because if you don't find purpose outside of work, then you're not gonna be fulfilled in this thing called retirement. So you've got to ask this question, are you tired of working or not? Some people aren't, some people love to work.
In fact, I love to work, I really enjoy the day to day, I love how hard it is, I love the challenge of it. It gives me some sense of like a mission to go accomplish and a goal to achieve and I really enjoy it. So I don't know if I'll ever retire personally, I might retire from this particular job sometime in the future, but doesn't mean I'm gonna stop working completely and just go hang out on the beach every day. I'm gonna find something else that's in the future for me, but I've got to be challenging myself, that's just my personality. Now, obviously not all of you are in that situation.
You might be in a situation where you have worked really hard physically for thirty plus years, and you're like, it is time for me to be done. Well, that's a different situation, and so you've got to evaluate what retirement looks like for you, because if you're tired of working, it might be time to take the leap and move into retirement. Now, this brings up an important thing in my mind around fulfillment, because if you look at any data or studies that have been done here on retirees, many retirees are not fulfilled. In fact, over half of them might end up saying, yeah, retirement is not what I thought it would be, and I'm kind of disappointed by it. And the reason for that is, is if you go from something like work, where you have an objective, a mission, someone's counting on you and relying on you every single day to meet an obligation of some sort and do your job.
Well, whether you like the job or not, guess what, there's something inherent about being human and being needed that gives you value and gives you a little bit of life. And so if you're not needed, if you're not valued in your workplace or anywhere in your home or community, that sense of purpose and belonging might drift away pretty quickly. So you've got to find something outside of work, even if you are retired, even if you are tired of working, you gotta find something that's fulfilling, and that might mean just more work, but in a different way. So you might change from a full time gig into some sort of consulting role where you're helping people in the same field with ideas and kind of direction on how they should run their company or whatever it is that you're consulting on. So you gotta ask yourself, are you ready to retire?
Are you tired of working or are you just tired of doing what you're doing so you can go do something else? You You gotta figure that out, and if the answer is yes, again, it might be time to retire. Now, here's the third question you gotta ask yourself, and this might end up being the biggest one in my opinion. Do you know what you're going to do in retirement? If you have no idea what you're gonna do, then I promise you, you're gonna be disappointed.
I just got off a call the other day with a client, and they just now, they retired back at the beginning of this year, so about six or so months into this thing, and they're just now getting the hang of it. They're just now getting satisfied and enjoying it, because at first they're like, oh my goodness, I just worked for however many years and now I don't know what to do with myself. I've got unlimited time, I've got resources, I've got money, but what's the point? Like what am I going to do every day? And they were disappointed.
They're pretty sad about it, honestly, and so they're just now figuring out this new rhythm, this new thing called retirement and if you don't have an idea of the non financial side of things as you begin retirement, it's going to be a struggle, I can almost assure you of that. So how are you gonna spend your time? What are you gonna do with it? Are you gonna be a full time grandparent? Are you going to help out the local charity?
Are you going to spend time traveling with loved ones or your spouse? Are you going to be playing pickleball or playing golf or whatever it might be? What are the things that you're going be doing and what does your week look like? I'd love for you, take some time, go for a walk and then just map out what your dream retirement week looks like. Is it wake up at six or is it wake up at eight?
I don't know, is it go for a workout or is it go for breakfast with a friend? All these things I want you to map them out and really say, what if I did this? What if I tried this for about a week or two before I actually pull the plug in and retire fully? What if I try this and see if I enjoy it? If I don't enjoy it, it might be time to either reassess, is retirement the right thing for me right now?
Or it might be time to reassess what you're gonna be doing in retirement. So I want you to think about what you're gonna do, how you're gonna accomplish that, because the biggest risk in terms of dissatisfaction in retirement is not around money and not having enough of it, it's around not knowing what you're gonna do and not having any purpose or fulfillment in this next stage of life. And this leads to the fourth question, which I think is really interesting, and most people just don't think about it. But if you are married, you have to ask yourself, is your spouse ready for you to be around the house more? So for example, let's say that you've been working and maybe your spouse retired a little bit earlier than you or a couple of years before you, or maybe they just weren't working at all.
And now you're gonna retire, so you're not going out of the house to work anymore. What you're doing is you're gonna stay home and you're gonna wake up together and you're gonna do the same things together. You're have breakfast together, you're gonna be on the same schedule, you're gonna in the house a lot more together. What you don't think about is that sounds great most of the time to us, you know, on the front end, but the reality is, is it's such a big shift that you or your spouse might become very unhappy with that arrangement because your separation whenever you are out of the house working and they're at home, that might be some of the time that you know, you get to get things done, you don't have to worry about anybody else or take care of anybody else, and it's like, hey, I just get to do what I need to do and do what I wanna do. But if that changes and now both of you are sitting around the house together, what if that's not optimal?
So you have to maybe have a conversation with your spouse and say, hey, what does it look like if I'm here more? Like what does it look like if I'm around more? Is that gonna, you know, hurt your day? Is that going to cause you to not do some of the things you want to do? Would it maybe cause some tension here within our relationship?
Ask those questions and put that out front on the front end and say, hey, let's talk through this because I don't want to jump off into retirement and then ultimately be a bad thing for us down the road. So maybe that means building in structure, maybe it means building in and say, hey, I'm gonna leave the house from ten to noon every day to do something outside of the house, that way you can accomplish whatever it is you enjoy doing here. So there's different ways to navigate that and think about but that's a question that a lot of people just don't think about that might be really hard once you get into it that you didn't expect. And the fifth and final question you've got to ask yourself is, do you have a real plan? And I don't mean like just a Monte Carlo simulation as I was talking about earlier, where you might have a 98% chance of never running out of money, that's helpful to know, but it's not a real plan.
It doesn't tell you when to take money out of your accounts or which accounts to take from first and when to do tax gain harvesting and when you should be doing Roth conversions, all those things can be found within a planning software. But the reality is you've got to build it and you've got to map all these decisions out because whether or not you can retire is completely different from how you're going to retire. So do you have a plan for what you're going to do and when you're going to do it? Are you gonna build into that plan additional expenses for travel or vacation or whatever you've got? You can't just walk into retirement with a, hey, I think I've got enough money and I think I'm gonna be good to go.
And this like mindset of I'm gonna just wing things and figure it out as I go, that that can work for a little bit and you might not run out of money, but the key is this, why would you want to just simply not run out of money whenever you can optimize your money because this is hard earned, you've worked over your career for this, this savings that you've built up, you need to optimize it, you need to save on taxes and have a great tax plan where you can. You need to make sure you're not overspending when you shouldn't be. You need to make sure you've got a plan for weird and down market cycles that are very scary at times from an emotional standpoint. So you've got to be able to have a real plan more than just have got the system says I'm gonna retire and I'm not gonna run out of money. That's helpful, but it's not really a plan.
Now, once you wade through all the complexities of decisions that have to happen and really mapping out your retirement income and your taxes and social security timing and all that, I really emphasize the importance of simplicity and taking all those thoughts and going through all the ideas and reaching the other side and writing those down on a simple document, a bullet point list of all the things that you're gonna be doing maybe with some timelines and why that's important and things like that, because I believe in simplicity. And one of my favorite quotes is by da Vinci where he said that simplicity is the ultimate sophistication. It doesn't mean that simplicity is easy, but you've got to wade through all the complexities and do all the research in order to reach the other side, which would be simple. I want you to be able to execute the plan, not create confusion, create simplicity by building out a plan that's real and is tangible and it's actually applicable to you and it's not just rule of thumb advice. So if you can answer these five questions and say yes to them, what's holding you back?
Like, why haven't you retired? And I get it, there might be that fear of the unknown, which every retiree faces, and, there's just an anxiety around it. But I think that if you can answer these five questions successfully, really take some time to process it, make sure the math works out and the numbers look good, but also the non financial side of things are looking good, and you've got a plan for that as well. It might be time for you to retire because here's the thing, I don't want you to retire too late. I don't want you to miss out on opportunities to take your your kids or your grandkids on a vacation.
I don't want you to miss out on all the fun that you could be having because none of us know when we're gonna pass away, and if working simply because you're scared to retire, even though you might have enough money is what you're doing, it might be time to really consider things and put it in perspective around, hey, I've got today and I don't know if I have tomorrow, let's go enjoy life and live a fulfilling retirement. And if you're looking for help with your retirement plan, we are open to new clients at this point, and you can do that by clicking on the link down in the description below where you can schedule an intro call with me so we can get to know each other a little bit. Thanks so much for tuning in to this week's episode of Retirement Answers. I look forward to talk with you again very soon. Hey, it's Jacob again, and I wanted to remind you that nothing discussed in today's episode is meant to be financial, legal or tax advice.
Retirement Answers is for educational purposes only. Thanks for tuning into this week's episode. I look forward to talking with you again next week.