Well in 2009 so far that is got to be the biggest question on baby boomers’ minds: can I still retire? The short answer is likely: yes, but it depends on what you are willing to live with or do.
The reality of your exact situation will depend on several factors that I can’t possibly cover them all here, but generally speaking your ability to retire will depend on:
- Asset Allocation: Before the fall in 2008 did you have mostly bonds or not? Because is you had mostly bonds you likely didn’t suffer too much of a % loss compared to others and it improves the odds of you retiring. If you had a lot in stocks, then it reduces the odds of you retiring.
- Cash Reserve: How many years can you live on your cash reserve prior to dipping into your other retirement funds? You want at least two years here. If you don’t have this cash keep working to build it up. You want to allow some recover time to your portfolio prior to taking the money out (especially if you had too much in stocks).
- Cutting Back: How much extra spending in your retirement budget that you can cut back? If you don’t think you need the spending you might want to consider just retiring on a smaller budget. If you cut back by $1000/year that saves you about $25,000 in retirement savings.
- Working Part Time: Another option for those that want some more time now, but can’t afford to quit out right is to shift down to some part time work, also called semi-retirement. By reducing your income to match your spending you can give your portfolio time to recover while you work only part time for a few years. This can be a real win to your current boss if you are willing to sell the idea to them. They get to keep your experience available, but free up cash in their budget to hire someone younger to fill the rest of the work load. Or another option is to change careers entirely when you go part time or if you have a marketable skill set perhaps you want to try being an independent contractor.
- Sell Other Assets: Perhaps the last thing people think of at retirement, but it’s all a matter how badly you want to retire and what you can sell. Do you really want a cottage when you never spend any time there and it is costing you money to keep? Do you really want to keep that RV when you used it only once in the last two years and you don’t plan on taking any big trips in retirement with it? Think about what you have and what you are going to use in retirement, it you don’t plan on using it consider selling it (especially if it is costing you money to keep it).
Now out of all of the above working part time is going to be the big trend going forward. I can see many companies doing the math an realizing you can higher two people for the price of one if you can get your older staff to drop to part time. It also then allows some internal transfering of skills prior to the full retirement of senior staff. In additional the part timers get what they want, some income, but more time to do what they want each week. If it is done right, it can be a good situation for several people.
So any other ideas for those that want to retire now? If so please share them in the comments.