When Can You Retire? 3 Honest Questions To Answer First

People ask when they can retire, and what they usually want is a number. Five hundred thousand. A million. Twenty times your salary. We have never found any of those useful because that number was built on somebody else’s house, somebody else’s town, somebody else’s plans. It was never built on yours.

So when can you retire? Not when you hit a figure from an article.

Why we had to ask when can you retire sooner than we planned

Terry did not get to choose his date. Covid ended his chef career in San Francisco in 2020. One week he had income and the next week he had none.

What he did have was savings. Not enough to stop thinking about money, but enough that the question was never about getting through the month. The question was whether the life we wanted was a life we could afford going forward.

Living where we were living, the honest answer was no. Our mortgage was adjustable and approaching thirty five hundred a month, so it was not even a number we could count on. But if we sold the house, we could buy one outright in a less expensive market. That is one of the main reasons we moved, and moving is what let us stop worrying about that payment.

That is what we wanted. To enjoy our lives now, while we are healthy.

Question one: what does your life actually cost?

This one sounds obvious and it is harder than it looks.

Not what you think it costs. Not what you spent last month, because last month might have been a quiet month. What it costs across a full year, including:

• Insurance
• Property taxes
• Car registration
• Anything else that does not show up every month but does show up

It is easy to underestimate this, and if your starting number is wrong, everything you build on top of it is wrong too. You cannot answer when can you retire until this number is real.

Question two: when does each piece of your income start?

This is the one that trips people up on timing, and it is the part I had not thought through until we did some research.

Social Security does not start the day you stop working. It starts the month after you claim it, and when you claim it determines what you get for the rest of your life. If you have a pension, that has its own rules about when you can start. Same with a retirement account, where taking money early costs you a penalty.

There is one more that has nothing to do with income at all. Health insurance. Medicare starts at sixty five. If you stop working before that, you are buying your own coverage until you get there, and that is a real cost that has to go in the plan.

So you are not looking at one age. You are looking at several, and they do not line up.

Question three: how long is the gap?

The gap is the stretch between when you stop working and when those income sources actually start, and it is usually the thing that decides the answer.

Some people have no gap. They work right up to the day Social Security begins and they hand off cleanly.

But if you are starting over after fifty, you may not be in that position. Something ended early. A job went away, or health made the decision, or the work just is not there anymore. Now there is a stretch of years to cover with whatever money you have.

So you need to work out whether your savings will cover that gap, and what it costs you to spend them. Money you use in those years is money that is not growing for the years after. That is the piece that moves the answer to when can you retire more than anything else on the list.

The expenses that decide when you can retire

There is one more piece, and it is the one that caught us.

You can sit down and add it all up. Income here, expenses there, month by month. And it works. The number at the bottom is positive and you think, alright, we can do this.

Then you have to put in a roof. And paint the house. And replace a car, and then the other car a few years after that. And the medical bills that were not planned for.

That is when it tightens. Not because you did the arithmetic wrong, but because those things never made it into the arithmetic at all. It is easy to plan for the bills that come every month and forget the ones that come every eight years and cost fifteen thousand dollars.

You know those big bills are coming. You may not know when, but you can make an educated guess, and you can schedule them into your budget so you can see what they do.

That is what Terry built the Financial Ledger for. You put those future costs in alongside your income and your monthly spending, and it lays out thirty years, month by month. Not a guess. The actual shape of it.

What it showed us was that the month to month was never our problem. Our problem was everything else. That is a real part of why we are both still working right now.

When can you retire is only half the question

You can get your retirement age right and still be unhappy when you get there, if you have not thought about what you want it to look like.

I know I will be able to retire when I am sixty five. But I love my job and also working as Co-Founder at Rebuild With Clarity. So I might cut my work week down to two or three days and do some volunteer work instead of stopping outright. Retirement does not have to be all or nothing, which is something we talked about in our Retired Now What Video.

What I do know is that in four years I want more of what I already love:

1. Time with my husband and our fur babies
2. More hiking, camping, skiing, and time out on the boat
3. Going out to eat and listening to live music
4. Days without the stress of work running underneath them

For you it might be grandkids, or traveling, or golf. Whatever it is, that is the part worth thinking about now. The age is just when it starts.

Photo is from our recent Cycling/Camping weekend.

Three things to work out before you pick a date

1. Know what your expenses really are, across a full year, not a quiet month.
2. Know when each piece of your income starts, including Social Security, a pension, a retirement account, and Medicare at sixty five.
3. Look at the gap between them, and put the big and unexpected costs in alongside the monthly ones.

When can you retire is not a number you wait for. It is something you can sit down and work out, and the answer belongs to you rather than to whoever wrote the article.

If you want help with that first part, our free guide is called Can You Afford The Life You Want. Seven steps to work out what your life costs, where you stand, and the gap between them: Get Your Free Guide here.

Whatever your answer turns out to be, it is better to know it than to wonder.

~ Donna, Co-Founder