I have advocated for a retirement plan in which the prospective retiree selects – in advance – an age at which he or she will retire. Some would call this retirement goal setting. I think this makes sense because without a definite target in mind, the date or age of your retirement may select you. Generally, that would not be a good thing. Let me explain what I mean by this.
If one of these conditions arises in your life before you are ready, the consequences can be devastating to the viability of your long range retirement plan.
So how do you avoid having a retirement age select you? More planning.
Planning for retirement in this context should include selecting your own retirement date. You must have a target retirement date. Without one, your financial planning may suffer from a lack of focus. To use a cliche here, failing to plan could mean that you are planning to fail, i.e., your retirement date selects you.
I read an article recently that made me think seriously about this concept. The article was about how to pick your “optimal” retirement age.
I’m not sure how to define an “optimal” retirement age. I just know that a retirement age that selects you is sub-optimal.
The article summarizes some retirement age statistics that are either interesting or alarming, depending on your perspective as to the general merits of retirement.
In 1991, only 11% of adults expected to retire after age 65. In 2014, 36% of adults expected to be older than 65 when they retire. Another 11% responded that they never expected to retire! This is quite a statistical change, don’t you think?
However, expectations of retirement age do not match reality. A recent Gallup Poll found that retirees left the work force at an average age of 60. Two-thirds of current retirees retired before age 65. Instead, 9% retired at age 65 and only another 18% retired past age 65.
Folks in other countries have different ideas about the ideal retirement age and most of them retire younger than Americans.
Health problems are clearly a major factor here with finances also playing a significant role. Unfortunately, planning to work longer to solve the latter problem may be unrealistic because bad health intervenes.
I must confess here that I am not 100% practicing what I preach. I am 64 years old but I have not selected a retirement age. I intend to wait until age 70 to claim my Social Security retirement benefits but I don’t know today if I will still be working then. This is an issue that I will be actively working on in the coming months. I am increasing my level of planning because circumstances require this.
In my job, it would be unfair to my firm and to my clients to let my retirement age select me. Long range planning is essential so that disruption in services being delivered is minimal. By long range planning, I mean one to two years of transition. I have already slowed down but stopping work entirely is a major step in the legal services business. I need to be looking far ahead on the calendar, then select a month and year that will be the “end” or at least when the transition will be complete. This will allow everyone who may be affected by my retirement to make their own preparations.
I have talked to three friends or colleagues who are close to my age who have recently selected their retirement age, all within 12 months. In some ways, I envy them because a decision has been made and they feel comfortable making it. Rather than wallow in envy, I have decided to take action.
In the coming weeks, I will be meeting with a consultant/coach who will be guiding me in making some important retirement age and transition decisions. This consultant will be engaged by my firm to assist me and my firm in this process. I will be the test case for this process. There are two others in my age bracket who will follow my lead on this (I hope). They may develop different plans, but that is OK. It is the plan itself – whatever it may be – that is important.
This will be interesting, exciting, and frightening, all at the same time. But it must be done if I am to remain in control of my own retirement age.