So back to the question... The simple answer is.... you can retire when you can use your assets and entitlements to feed your spending needs. At the root of all the analysis, projections, and wizardry, it's that simple. That’s why, during one’s working life, the goal is to “build the savings pile” AND get spending under control. For us, it's all a math equation with a few spins and tweaks. Factors like life expectancy, withdrawal rate, inflation rate all come into play but they don’t change the basic formula. Spending vs (assets and entitlement cash flow).
On the spending side... refine and understand your budget. Our experience has shown that people with consistent, disciplined, and known spending habits fare far better in retirement than those who are not budget conscious. Simplistically, people who live within their means will succeed and people who don’t will not. As we wrote about prior, spend lots of time and attention on your budget. It’s well worth the effort.
On the asset side... Save early, save often, make it an obsession. In future articles, we will dig deep on the saving and investing vehicles, but for now... save. Let compounding do its thing and let time work for you. Invest wisely, diversify, dollar cost average, stay in your correct risk tolerance. You don’t have to make a “killing” on Wall Street to succeed, nor take undue risks.
On the entitlement side... If you work for a company that has a pension, great! Take some time to understand it. You can request the plan document from your HR department and we can help you go through it. Social Security is another important cash flow source and one many don’t understand. Contact Social Security through their website (SSA.GOV) and sign up for an account. Review your own data for accuracy and projections. While it will change over time, understanding your current situation helps in future planning. We can help you interpret the data or assist in walking you through obtaining it. It will seem a little fuzzy at first but each of these entitlements at their core are all about interest rates and mortality tables.
As always, feel free to reach out about this topic or any other. If you know of anyone who could benefit from our writings, let us know and we can add them to the distribution list. Looking forward, the next articles will dive deeper into retirement savings vehicles, Social Security, pensions, and other related topics. Stay well, enjoy the spring, and talk soon!