Deciding when to retire dictates the rest of your life.
One of the most challenging questions a person can face is when it’s time to leave the workforce. Americans are choosing to retire later than previous generations, and part of it is money. But finances aren’t everything. Retirement isn’t just leaving a job and title, it’s a milestone for a new phase of life.
There’s a hundred articles about how to “know” what’s right for you. I’d rather look at an example.
Let’s take a look at Dr. Danny Federman, a 65-year-old physician living in Charlotte, NC. Married at 23 to his high school sweetheart Rebecca, he has two adult children. Since they moved out and started families of their own, the day-to-day pressures of Danny’s have changed. He no longer needs to consider how he will pay for his children's college education or his private practice.
Speaking of work, the healthcare industry has changed so much that Danny isn’t sure he wants to stay on with it. And with $3M in assets, should he want to?
Danny hadn’t considered retirement seriously—until now. While visiting his one grandchild, a rosy-cheeked kid just starting kindergarten, the question innocently popped into his head: When should I retire?
This time, it carried weight.
Danny didn’t want to go into the office or make hospital rounds. As he watched his grandchild show off her new backpack and ramble about school, he realized he wanted to spend more time at home.
Technically, he has enough to retire now, Danny considered as he drove home. Both he and his wife are in good health, and his kids pretty much take care of themselves. They live modestly, and own their home. What else could work provide?
The idea is a pleasant one. He imagines sunny afternoons outside in the garden, rather than stuck behind a desk filling out medical records at a patient intake. He dreams about hobbies never pursued, vacations never taken.
“Why not retire this year?” Danny asks his wife.
His wife, Rebecca, is less certain. She works as a travel agent. She loves her job, but she is also focused on the family finances. Rebecca isn’t necessarily risk-adverse, but she realizes how quickly things can change. The pandemic lockdowns are still fresh in her mind—she remembers her industry coming to a standstill.
“Is $3 million really enough for both of us? Everything costs so much more now.”
There are a thousand worries:
One question raises another. Rebecca calms herself, knowing that she doesn’t necessarily have to retire. Yet, she also feels that Danny has a more stable career. Someone always needs a doctor—vacations are expendable.
The couple hashes things out. If Danny retires first, and Rebecca joins him in a few years, will their nest egg last?
But one of the most important questions isn’t asking if your retirement fund is enough to live on. Actually, it should be how long you expect to live.
It’s a morbid question. But having an idea of your longevity tells you how long that money has to last. Retire at 65 but have a family history of passing away by 75? You could live like a king on less than $3 million. But if you’re expecting to live until 100? Well, you’ll need a plan to ration things out.
And of course, that $3 million is split between two people. Both will require additional healthcare as they age; both will want to pursue hobbies; and both will not be working.
That $3 million didn’t come easily. It was earned through decades of hard work and intense study–and some luck. Investing in Apple early was one of them, although other investments didn’t turn out nearly as well.
A financial plan would be useful, the Federmans think. But who can they trust?
Luckily, Danny has a wide circle of good friends. He asks around, and shortlists five financial advisors, all three fiduciaries. As a fiduciary himself, he understands the value of objective advice.
He and Rebecca whittle down their options to an advisor they like. One that shares their values, and has decades of experience.
The couple has plans to talk about their portfolio. But to get a real feel for their financial situation, the advisor needs more.
That $3 million portfolio is only a piece of the retirement puzzle. Property, cars, rare art, family heirlooms and other non-cash items can be just as important to document, the advisor explains. Liabilities, such as a car loan or credit card, are just as critical to understanding Danny’s financial situation.
So, the Federmans take stock. Danny owns two vehicles, both paid off, and a two-bedroom house. There’s not a lot of room to downsize, except for perhaps selling a car and moving to a state with friendlier taxes — but that’s not mandatory. His family and friends are in NC; they’ve attended the same synagogue for over twenty-years. Why should they leave their community?
His wife feels the same way.
Money matters. Your finances paint a picture of your lifestyle moving forward. But it’s not everything.
You don’t only need to know how long you expect to live, but you're also your passions and obligations. Who you are changes in retirement—and this is something few realize until after they’ve made the jump.
Can you confidently introduce yourself without a job title or position?
After decades of work, being a doctor has become central to Danny’s view of himself. It is his title, his work, and how he spends his days.
Danny isn’t sure he can describe himself as anything other than a doctor. Sitting there across from his new advisor, he is scrambling to collect his thoughts. He can imagine possible activities: could become more active in the local Jewish community. He could volunteer, provide mentorship, and get a part-time job. He’s always wanted to go on a cruise in the Mediterranean—and so has Rebecca.
But none of these ideas stick out as a new identity.
Doubt sets in. Should he retire?
He looks at the advisor, as if he should give an answer.
Your advisor does not tell you what to do. They collaborate with you and provide, ideally, objective guidance on what to do next. And, importantly, they listen.
What Danny’s advisor proposes is simple: Getting basic finances in order first, then determining the “free money” in the budget for Danny to experiment with in retirement. Of course, that’s not all — his wife should be involved, too. As a married couple, it’ll be a joint endeavor to determine what retirement will look like.
What that will look like depends on each individual case. What could a $3 million portfolio look like? That’s where a financial plan comes in.
Many soon-to-be retirees draft an initial financial plan themselves. But it doesn't hurt to have a second pair of eyes - especially the eyes of a professional with training and expertise in wealth management. If you're ready to take that step, book an introduction call with us today.
Disclaimer: This article refers to a fictional client. Danny Federman is not a real client. While it's probable that someone, somewhere, shares the name of the character, Danny is not real. However, his story does highlight common client concerns.
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