I recently did a series of articles describing a simple process for deciding whether you can retire – from a financial perspective. One possible outcome is that you can't, at least not yet. But even if you can, there is another dimension to consider before pulling the trigger: should you retire?
The financial aspects are very important. But the decision to leave the workplace, perhaps for good, is a big one and not to be taken lightly. A while back, I wrote about the questions that I would need to answer before I made the decision to retire. In this article, I discuss this basic question: Even if you can retire, should you?
Some are looking forward to retirement
Lots of people get excited about retirement and have plans for how they will spend their time. They look forward to the flexibility and freedom that retirement can provide. It can indeed be a gift to us in that way, and also a blessing to others if we spend at least some of our time productively, especially in service-related activities.
I have not been in a big hurry to retire. But when I do, I plan to approach it like another vocation, similar to how I have approached things at other times in my life. Gene Edward Veith wrote on the Acton Institute blog that Martin Luther taught that each of us has vocations in our various callings, as "spouse, parent, church member, citizen, and worker." His "doctrine" of vocation taught that the main purpose of vocation is to love and serve our family and our neighbors, which includes the economic aspects; although one could argue that it isn't the most important one (Matt. 22:37–40; Gal.5:6; 1Tim.1:5).
Once I leave the workplace, I will still have family-related vocations as a husband, father, and grandfather. I will also have one as a member and a deacon in my local church. Other vocations would include writing, financial coaching and counseling, and other things I hope to be involved in when I retire.
Others, well, not so much
But others have reservations. (I have some myself.) Some may want to retire, and may be financially able to, but are concerned that retirement could be disorienting and boring; or, they are worried about being less active and engaged and the adverse effects it can have on their health.
These are valid concerns. People can have problems in retirement due to boredom and from a lack of activity or intellectual challenges; and perhaps more than anything, from a lack of meaningful and purposeful involvement with others. Recent studies have shown that many retirees become depressed, mainly due to loneliness, and that too little activity can lead to health problems. But I think retiring with a lack of purpose would be the worst of all.
A recent university study accentuated these concerns when it found that there is a strong correlation between people who begin claiming their Social Security three years early (at 62) and death – particularly men, whose mortality risk jumped about 20%. Randy Alcorn commented on this phenomenon on his blog,
When a man retires at sixty-five, studies show his chances of having a fatal heart attack immediately double. Our minds and bodies weren't made for an arbitrary day of shutdown. Nowhere in Scripture do we see God calling healthy people to stop working.
This is true. Work or at least engagement in productive activities as long as we are able seems to be God's design. That can take different forms, as Alcorn goes on to say:
Of course, it's perfectly legitimate to work without pay. It's your option to give labor to ministry and volunteer work rather than to your present job. But as long as God has us in this world, He has work for us to do. The hours may be shorter, the work different, the pay lower or nonexistent. But He doesn't want us to take still productive minds and bodies and permanently lay them on a beach, lose them on a golf course, or lock them in a dark living room watching game shows.
As he points out, retirement from a full-time, paid position opens up a world of opportunities for things that Christians can do to spend their time, at least most of it, productively, for as long as they are able. Sitting in "a dark living room watching game shows" sounds abysmal – may God save us from such a life in retirement.
It's pretty clear that because people get so much meaning and satisfaction from their careers, for some, retirement can be a tough transition to make. That seems consistent with what the Bible teaches about the nature of man, created in God's image, as it relates to work. God is a creator and a worker, and he baked those qualities into his crowning creation, man.
It may seem ironic that I am talking about work in the context of retirement since a lot of people tend to view retirement as a cessation of work. We were created to work. God commissioned it in the Garden before the Fall. Even afterward, when work becomes more tedious and toilsome, it has retained the dignity and value that God ascribed initially to it.
Finances can be a show-stopper
And of course, there are those for whom retirement just isn't financially feasible, at least not yet. For most of us, work is how we pay the bills. We can also have significant financial problems if we retire without the ability to do that.
I'm talking about making sure you have enough income to live on, not what you need to live on a yacht. However, as I discussed in the "Can You Retire?" series of articles, you not only need to make ends meet. Depending on your age at retirement, you also need to do all you can to ensure that you're able to do that for a long time, maybe longer than you think.
If you have fallen behind in saving for retirement, working longer – even for a short time – may be just what you need to be in a better financial position when you do retire.
A study by some economics professors at Stanford and George Mason Universities which was cited in a MarketWatch article found that people in certain salary ranges working just a little longer – only three to six months – could have the same impact on your standard of living in retirement as saving an extra one-percent of your income for 30 years! The explanation provided in the article was that deferred Social Security (higher monthly check), and a larger retirement savings balance. The scenario seemed to apply to someone who's Social Security made up a very high percentage of retirement income.
The study also said that working longer than just a few months (i.e., a few years) can have even more dramatic effects. For example, if you work until age 66 instead of taking early retirement at age 62:
- Social Security benefits increase for each year you delay receiving benefits (25% increase between age 62 to age 56; 130% increase if you wait until age 70)
- Your retirement investments have three more years to grow and provide more income later on (growth will depend on your investing strategy and returns)
- You're drawing down your investments for four fewer years; the money that you didn't withdraw continues to grow (compound interest plays a big part in this)
- If you participate in a traditional pension plan, your benefits can increase with additional service (if you're fortunate enough to have one)
If you are getting close to retirement and haven't saved enough but can work longer and also increase the percentage you are saving; you have an even higher possibility of being able to retire with dignity. The best overall approach is to work longer, increase saving a little each year, keep your investing costs low, and delay Social Security. That has a positive quadruple-whammy effect. In fact, one of the professors involved with the study said the following in an interview:
'So, say you're 46,' he said. 'And, you're thinking of retiring at 64. And, well, you do the projections, and you're in terrible shape. Well, if you work till 66, it'll look a lot better. And so, you'd have about 15%, 16% more income for the rest of your life if you just added those two extra years of work. So, yes, there is a way to offset the effect that you didn't save enough, namely, it's work a little more. And, we're not, I'm going to repeat, I mean we're not asking people to work till they're 80 or even till they're 70.'
When it comes to saving for retirement, patience and persistence are key. The Biblical principle is that, in most cases, it takes time to build wealth. It's not easy and there are no shortcuts. As Proverbs 13:11 reminds us:
Wealth gained hastily will dwindle, but whoever gathers little by little will increase it. (ESV)
Should you retire?
Over the last decade, a slowly improving economy, tight job market, depressed wages and salaries, and saving account shortfalls may be a big part of the retirement equation, but there are other things at play. Many people want to keep working because it keeps them busy and engaged – they don't want to end up in a dark living room watching game shows all day.
For these reasons and others, more and more people are choosing to work longer or to work in retirement. Although the average retirement age in the U.S. in 63, many who planned to retire between age 55 and 65 are working until age 70 or longer.
I know, "work in retirement" is an oxymoron – and it sounds a little disingenuous too – but a lot of people are leaving their "regular job" and finding something entirely new and different to do in retirement, but with the same goals in mind. Can you retire and choose not to work, at least not for pay? Certainly, but if you need to work for the money (maybe you want to have extra to share with your family and others), or do it just for the "fun" of it, you have some options.
You have options
There are several different scenarios that you might consider if you are nearing retirement. Which you are most inclined toward will depend significantly on your situation. Some may be options for you and others may not.
1. Continue to work (not retired)
This option means staying in your current job and continuing to work past the age you could have retired (which may or may have been your "full retirement age"). I'm currently in this category by choice; perhaps you are too. I like my job and I like working. Or, maybe you wanted to retire and worked through the process that I laid out in the "Can You Retire?" series and concluded, no, I can't – at least not yet. If so, and you are not working in a job that makes you miserable and is ruining your life, then you will need to continue to work.
As I discussed above, use that time, even if it's only a few years, to save more and be sure you are investing wisely. And get help if you need it. You may be able to retire sooner than you think. It will also keep you active, busy, and engaged and in a familiar situation where you can serve others.
If there are things you don't like about your job, which may have led to you to want to retire in the first place, maybe there's something you can do about it. Try to find ways to make your situation at your current job better. Perhaps that's a different job, or a different boss, at the same company. Or perhaps you need a change in surroundings. If you are bored and unchallenged, let it be known that you want a more meaningful assignment. In other words, don't just go with the status quo if there's anything you can do about it, especially if you plan to work a few more years.
2. Continue to work, but at something new (not retired)
In this scenario, you have decided that you need to continue to work full-time but don't want to stay in your current job. You may have also concluded that the things you don't like about your job are not things on which you can exert influence for change and want to move on. God may have you there for a reason, in which case he will give you the wisdom and strength you need to persevere (Col.1:11; James 1:2-3; Heb.10:36).
If you do decide to make a change, this may be a more challenging situation than the others as it can be difficult to change jobs when you are older, for reasons that are well-known to many of us.
The good news is that many companies are beginning to recognize the value that mature, experienced, knowledgeable workers can bring. If you have skills that are transferable from one situation to another you may have a shot, all the more so if your skills are highly specialized and in demand.
3. Work part-time (transition to retirement)
This means staying in your current job, or something different, but working less. That could be working a part-time schedule, or negotiating (or purchasing) additional vacation time. Maybe an unpaid sabbatical once a year is what you need. The idea is to continue to work but also free you up to do other things you want to do.
The disadvantage, of course, is that working less will mean less income. If you are behind in saving for retirement, that might not be a good idea unless you use the additional time to come up with other ways of making money, perhaps a start-up business of some kind. Plus, depending on your plans, you could spend more in semi-retirement. That creates a negative "double whammy" financial effect: less income and more expense, so make sure you can handle it.
You may think this is difficult to do, but it may be easier than you think. If you are a valuable employee, many companies would rather have you part-time than not at all. You may have more leverage in negotiating a different working arrangement than you think. Some employers will make concessions rather than lose a valuable employee that they have to replace. Plus, they may save some money in the process.
4. Do something entirely new (retired)
You will have commitments and relationships, perhaps in your family and especially in your local church and other ministries that you will carry with you into retirement. And then there are the things – maybe a new career or business – you've always intended to get to when you have the time. Well, once you retire, you will!
Each of us has our interests and lifestyle. There's no reason to make big changes going into retirement unless there are other things that interest you. Keep doing what you're doing, perhaps more so, if you can. But if you look ahead and don't see productive ways to spend your time, consider making some changes. That's where part-time work, a small business, or new volunteer/serving opportunities come into play.
If you decide (or have to) retire on somewhat "shaky ground" financially (perhaps you are withdrawing 5% or more from your retirement savings), you may need to find some work to provide supplemental income.
If you are withdrawing 5% a year from savings of $450,000, you only need to earn $6,750 a year to be able to reduce your withdrawal rate to 3.5%, which is more sustainable. Of course, you'll also need to control your activities (somewhat) and spending to avoid running out of money.
Many of us will not have the same stamina or effectiveness of our earlier years in your conventional career, but that doesn't mean you don't have a contribution to make. The blessing of retirement is that just that you'll have more spare time – it's that you have it to spend doing things that satisfy your needs and help others.
You will need to remain flexible. You may need to change your focus several times, and you may not have the financial resources to do all the things you'd like. So, the sooner you get a clear sense of what God has called you to do in retirement. If you want to check out the jobs that are available to retirees, there are lots of websites out there. Here are a few of the most well-known ones: RetiredBrains.com, Encore.org, RetirementJobs.com, Workforce50.com, and Workamper.com.
Challenging but worthwhile
Finding the perfect work for you is never easy regardless of what stage of life you're in. If you are "stuck" try to do all you can to get yourself moving out, or try to improve your situation if you can. If a new position is what you're after, I recommend Dan Miller's 48 Days to the Work You Love and also What Color is your Parachute – 2018 Edition.
Once you are in retirement, you may have the flexibility to demand less of a job. You can check one out and move on if it doesn't work out. Retirees are increasingly finding work to do in retirement so the opportunities are out there. And you can always create your own if you have an entrepreneurial bent.
If you are fortunate enough not to have to work for pay in retirement, then you have the freedom to give your time away in service to God and others – that is the very best scenario. As John 15:13 says,
Greater love has no one than this, that someone lay down his life for his friends. (ESV)