Is Retirement Age the Wrong Goal?

I named this blog after a goal I set back in 2002 to retire at age 55, one year before the age my Dad retired. The objective has driven many financial decisions over the past 20 years. 

My goal had all the markings of a SMART goal — specific, measurable, achievable, relevant, and time-bound.

But now that I’m older and think more critically about money and family, I’ve questioned whether retirement age is an appropriate goal for aspiring retirees. 

Several factors have led me to rethink this 22 years later. 

Retirement Defined

I always thought of my goal as traditional retirement, that is, to withdraw from active working life. The day my Dad retired was the last day he ever earned money from a job. 

He was my retirement role model. For years, I planned to stop working completely before age 56, but that’s not likely anymore.

Retirement can be interpreted in many ways. One can retire from a career but not stop working for money.

For example, an NFL football star might retire from playing but continue working as a commentator. Are they retired?

When I left my job at age 48, I could have declared myself “retired” from my career, but I never saw it that way.

Now that I’m happily self-employed and earning a living to support my family, I’m less interested in traditional retirement.

At this stage in my savings journey, I no longer expect to exit work at or before age 55. That’s a change from 2019 (when I first published this blog post). 

Five years ago, my career involved a brutal D.C. Beltway commute, 1,840 billable annual hours, and in-person time commitments.

Those undesirables are gone now. 

Diligent saving, investing, and my part-time entrepreneurial work enabled an early off-ramp from a humdrum career.

I’m more driven in my new “career” than ever. 

So, a better goal today may be to retire when I’m good and ready, without a specific target age.

Family Considerations

We’ve committed to paying for four years of in-state undergraduate college tuition for all three of our children.

Our oldest child will start his first year when I turn 55. If I were to retire in the same year, we’d need to have everything saved to pay for college before then. 

That fact alone made me question my original retirement age goal.

If all three kids follow a traditional four-year college path, they won’t be fully graduated until I’m 63, which is about the average retirement age. 

Considering the expected cost of a four-year in-state college education for the class of 2037, I’m terrified by the numbers. Working through that year to have cash flow for education costs makes a lot of sense. 

Working as a W-2 IT consultant until then wasn’t feasible. However, continuing as a self-employed full or part-time worker is a viable option.

Unless we can sufficiently build our 529 accounts and supplemental income streams well ahead of time, retiring before our kids finish college could put our long-term retirement security at risk. 

My original retirement goal forced me to aggressively save for college since each kid received their Social Security card. It feels less urgent now. 

When we’re done paying for college now seems like a more pragmatic retirement goal, considering our substantial financial commitment to education.

Travel Considerations

The whole point of setting a retirement age goal was to free my time for extended periods of travel. 

I had no idea if or at what age I’d begin and stop reproducing new humans after 14 months of backpacking the world. 

My youngest won’t graduate high school until I’m 59. So the idea of traveling for several months of the year before then doesn’t make a lot of sense. Our daughter will need to finish high school and head off to college before we can consider leaving for extended periods.

We can still take adventurous summer vacations with the family from now until college. But the extensive retirement travel I envisioned when I was 27 years old will likely have to wait until I’m 60 when we become empty nesters. 

Conveniently, that’s when we can start withdrawing from our retirement accounts without penalty. 

Alternative Measures

If retirement age isn’t the right goal, what is?

Family considerations are at the top of my mind. That was hard to envision when I was single and living with my parents. 

My kids are at the center of almost everything I do. Mornings, weeknights, and weekends revolve around them and their activities. 

One day, I’ll enter some kind of traditional retirement. It’s nowhere in sight for now, and I’m OK with that.

I’ve finally found a career from which I don’t want to retire. 

But many of you are still in careers you can’t wait to leave. Retirement age can be a good measure if a pension or other benefit kicks in after a certain number of employment years.

Fifty-nine and a half is a vital threshold, as are the various levels of Social Security eligibility.

What are some other alternative measures of retirement readiness?

A Random Number

Shortly after the dot-com bust in 2000, a coworker told me he’d retire if he ever had $200,000 in retirement savings again.

I don’t know how he came up with that number. It seemed insufficient and arbitrary.

But he lived a simple life outside work and could have probably made retirement work on that amount. 

He lived in a paid-for manufactured three-bedroom home in an over-55 community in Florida. He traveled for work and kept his expenses low. His wife worked. 

His idea of splurging was to buy a cold beer that didn’t come in a can or an occasional porno rental.

He worked for at least another decade, well past the Great Recession. Eventually, he retired, but I’d guess that he saved much more than the $200k goal he declared in 2000.

There’s nothing wrong with modifying goals. We should all keep an open mind about the goals we pursue.

Data-Driven Plan

Picking a random number is a bad plan. Elaborate spreadsheets are insufficient these days because we have robust tools that can help us plan out our retirement years with the accuracy of a professional financial planner for a fraction of the cost. 

Multiple low-cost planning tools let us input all of our personal financial data into the tools, and they provide estimates and projections that help us determine if we’ve saved enough. Plus, you can play with different scenarios to see how they impact your financial plan (e.g., can I buy a vacation home, etc.). 

NewRetirement (review) is a comprehensive retirement calculator that empowers DIY planners to model their finances from today until their “longevity age” (death).

I used this tool to help me determine if I could afford to leave my IT career and be self-employed. NewRetirement has evolved into a powerful planning platform that informs decisions with data and precise projections instead of guesses. 

The 10-year-old startup recently raised $20 million to help get this tool into more hands.

Setting up a basic plan is free, and it costs just $10 per month to link financial accounts and get full access to hundreds of tools and data points.

Another tool is ProjectionLab, which has a sleek and modern interface. Coincidentally, the ProjectionLab founder and I worked at the same company while building our side businesses. He left about a year after me. Use the ProjectionLab “RBD-10” to save 10%. 

Considering the cost of hiring a financial advisor, these DIY financial planning tools easily provide value beyond the costs.

Financial Independence

Because of all the nuance around the word retirement, financial independence is often a favored financial goal rather than retirement age.

Financial independence is when you have enough savings or passive income streams to support your desired lifestyle in perpetuity.

Your “FI number” is calculated by estimating your annual spending and multiplying it by 25. Then, aim to save that amount in cash and invested assets. 

Aiming for the FI number is a specific, measurable, achievable, relevant, and time-bound goal, too.

My only concern with this goal is if asset growth is primarily a result of market returns, the market can retract, and the goal could become unachieved.

Net Worth

Net worth is an easy number to calculate, which makes it an OK candidate for setting measurable goals. It takes just four steps to calculate net worth. 

This measure includes the value of your primary home, cars, businesses, and other assets. Using the FI number is a preferred measure because it requires a higher liquid savings target, and the money is more accessible for living expenses. 

The problem with using net worth is the hedonic treadmill. Once people save “enough“, they tend to want more. 

I’m reminded of this viral tweet: 

A Harvard professor asked millionaires how much *more* money they'd need to be 10 on the happiness scale.

Here's how each group answered:

$1 mm: Double
$2 mm: Double
$3 mm: Double
$5 mm: Double
$10 mm: Double

Folks, the hedonic treadmill is real

— Khe Hy (@khemaridh) April 25, 2023

If you’re going to use net worth to determine when you’ll retire, you need to make a firm commitment or you may never pull the trigger. 

Conclusion

I’ve been a student of finance and investing for my entire adult life. This is what I do for fun on Saturday nights. 

But I may have focused too much on retirement age as a financial goal. Early on, I could have focused more attention on finding a career from which I did not want to retire. Eventually, I found it. 

The years of saving and investing put me in a financial position to leave my IT career and pursue work I genuinely enjoy. 

Pursuing early retirement has given me more freedom and, ironically, made me want to keep working.

Knowing I’ll probably work past age 55 motivates me to grow my business. 

This article was originally published May 5th, 2019. I’ve updated it to reflect my current mindset.