When Can I Retire?

May 20, 2021

A common question I hear is “when can I stop working?” Not that the client necessarily wants to stop working, they just want to know that they can stop. That would be my definition of financial independence; knowing that your investments or other income is enough to support your lifestyle, independent of your work.

Financial independence: When you can support your lifestyle, independent of your work.

There are a number of ways to make this work. Figure out what your current income sources can provide (investment income, pensions, Social Security), and decide whether you can live on that income. If not, you’re not financially independent yet. Simplistically speaking, you can solve this by reducing your expenses to the level of your expected income, or increasing your (non-job) income sources to the level of your lifestyle needs.

Raising your non-job income level may mean creating a passive income stream or saving to get more money working for you. If we can find the level of current spending that also allows you to save enough to support that same level of spending in retirement, at the time you want to retire, we’ve reached what I call a sustainable spending level.

To narrow the gap between where you are and financial independence, you need to find the balance of working longer, saving more, and figuring out how to live on less. To determine what your Sustainable Spending level is, we’ll need to factor in how much income your investments can produce, what your other income sources will be in retirement, and what your current investments, income and spending look like. With this information, we can begin to answer the question “when can I stop working?”

Another consideration is what you’ll do with your financial independence. Will you keep doing what you do, but without the financial pressure? Pursue a Passion Job? Donate your time to special causes? Perfect a sport or hobby? Travel more?

We love to run the numbers and help people design a plan for getting financially independent, but we also love watching what comes next.