Over and over I read about various people’s plans for retirement. You know the one thing that they have in common? They all have different approaches. There is no “one size fits all” approach to retirement out there. Rather than try to match someone else’s approach, I have laid out a number of my own possible scenarios:
1) Retire at 65 and do absolutely NOTHING
This is the least attractive scenario for me. The magical number of 65 would (in theory) give me access to medicare if it’s still around. It would also give me a longer saving horizon giving more of my money time to compound. If I retire at 55 with $1 million, waiting until 65 could increase the number to over $2.3 million without contributing another cent. That assumes I get 9% on my money, although that may be aggressive considering I’ll be less interested in the risk to get a 9% return.
I really don’t want to wait until I’m 65 to quit working. Frankly, I don’t like work and would much rather pursue other interests.
Pros:
- Longer saving horizon
- More health care options
- Less risk in outliving my money
Cons:
- I’d have to wait until I’m 65
- Less quality years ahead of me
- Life is short
- Less time to pursue other interests
2) Retire at 55 and Do Nothing
This option sounds pretty darned attractive to me but I’m concerned I’d get pretty bored and I KNOW I’d annoy the heck out of my wife while trying to keep busy. This option also carries a lot of risk in it. While we are saving pretty aggressively, we aren’t saving aggressively enough to live on our money for 35+ years. If things went well in the economy, we could probably pull it off, but I’ve proven to myself that I’m pretty darned risk averse and would like to have as much cushion as possible.
55 is a good age to stop working, but I just don’t know what I’d do with the time.
Pros:
- No longer a slave to a job I’m not too excited about
- More chance to try new things and explore the world
- Potentially many quality, healthy years ahead of us
Cons:
- What do we do about health care?
- How would we make our money last?
3) Retire at 50 and get a lower paid job in an industry that I am interested in
There are lots of jobs out there that I would love to do but the money is terrible. We just couldn’t live on the salaries that these jobs pay. I think this option is probably the most practical and interesting option of the 3. If we scaled back our consumption and had our homes paid off, we could easily live on much less than we do today. Our only bills would be taxes and ongoing living expenses like power, water, cable etc. By retiring (aka switching careers) at 50, we could work less, and do work that was more meaningful to us. This option would also give us access to health care options that we wouldn’t have if we sat at home.
We are on target to pay off our houses before we turn 50 and we don’t maintain any other debt so this option is actually quite achievable. The only gotcha here is that our daughter will just be going in to college. We are hoping to offset that by investing today in a 529 plan for her.
Pros:
- Pursue work that we enjoy
- Access to health care options
- More time for hobbies and other interests
- Use much less of our invested assets due to income from the low paying jobs
- More time for invested money to compound
Cons:
- Quitting your high paying job while your daughter is in college doesn’t feel too good
- May not have as much time to travel and enjoy “retirement”
