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Plan Well, Retire Well

Saving and investing your money

Retirement: A Personal Decision

As many of you know, I have been writing and teaching about retirement planning for years. It's familiar territory for me. But it was a very different animal when I recently wrestled with my personal decision about whether now was the time for me to retire from the University.

I'm going to spoil the suspense and tell you the ending up front: I am retiring from University of Illinois Extension as of June 30. I hope to continue to do personal finance education, and even to be an occasional guest blogger here on Plan Well – Retire Well. But my duties as Consumer Economics educator will be over at the end of this week.

For this last post, I decided to talk with you about the kinds of information that helped me make this decision. There is much that is uncertain: how investments will perform in the future, how long my husband will continue to work, how much income I will be able to generate from my work as an independent financial educator, and what the future inflation rate will be, to name a few. But there was a lot of other information that was available to me. I tried to make good use of all of it when making this life-changing decision.

I didn't accumulate this knowledge and information overnight. So even if you think retirement is a few years away, start thinking about the information you will need to make an informed decision.

Here are some of the specific things I have done to fully understand my financial situation and how different decisions would change it:

  • I track my monthly and annual expenses. I started doing this long before the online programs and mobile apps were available so I download all my transactions from my bank and credit card accounts using a software program. I run reports to see how much I spend in various categories, how much we're really saving, and to see how those numbers vary from one year to the next.
  • I listed the major upcoming expenses I have planned, such as a new car or repairs to the house, and estimated those costs. I have planned where that money will come from.
  • I estimated what my expenses will be after retirement.
  • I evaluated when to begin claiming Social Security benefits, which will be reduced due to the fact that I will also receive a pension for government work where I did not pay into Social Security. Because I am subject to that reduction, I used the special WEP calculator on the Social security website instead of the usual benefit calculator to estimate my benefits.
  • I do a net worth statement at least once a year so I know the value of my assets and liabilities.
  • I compared my expected income and expenses, and projected when and how much I will need to withdraw from on savings to fill the gaps
  • I studied the research on sustainable withdrawal rates and have an idea of how much I can withdraw from my savings and investments each year and have some assurance that my money will last as long as I will.
  • I know the rules for my pension. I read and re-read all the information available about it. I attended educational sessions about my benefits. I also had an individual counseling session with a representative of the retirement system to be sure I understood what would happen under various scenarios.

The decision about when to retire is a very individual one. And it isn't all about the finances. I also weighed the burden of a long commute, my desire to do some things that I can no longer do in my current position, and some quirks about my pension plan that meant I should either leave now or be certain I would work another two or three years.

There are many uncertainties, and I have re-evaluated this decision more than once. But at least I know I made an informed decision. Now it's time to move on.

I have thoroughly enjoyed writing for the Plan Well – Retire Well blog. I hope you have enjoyed my posts, and maybe picked up some useful tips along the way. And I hope to be back, at least from time to time, to share the new things I'll be learning.

Thanks for listening.

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Karen: Thank you for all the great financial insights you shared with us at the Naperville Library programs.
by Ron Ouellette on Tuesday 7/31/2012

Enjoyed your article a lot. I am also a planner and there is no substitution for doing that. If there is anyway to contact you individually, let me know. I would love to run some questions by you.
by Elizabeth Berry on Thursday 8/9/2012