Behind the scenes of every Fed’s personal decision to retire is a set of justifications for why the time is now right. Every one of us will eventually have this mental tug of war comparing the pros and cons of retiring. Every justification, every reason, every inspiration, or excuse that gets attached to our final decision falls into 4 underlying categories.
The good news is that 1 of these 4 motivations will almost always result in a secure retirement with true financial freedom. The bad news is that 3 of these 4 reasons commonly won’t. The scary part is how few of us are really aware (or choose to acknowledge) which of the 4 influences are driving our own retirement decisions.
The 4 Motivations are:
Your Situation
The first is your situation. This is the most easily identifiable of the 4 reasons.
There are many ways in which our situation can force us into retirement. Perhaps your job (or even your agency) went away, perhaps a family member fell ill and needed your attention/care, perhaps your health failed you. When your situation forces your hand… the game ends. If you procrastinate until the 4th quarter you are taking a huge risk because, unlike in football or basketball, when it comes to the game of life the time you have left on the clock can change in an instant.
The best way to manage these situations is prior preparation, emphasize building your safety net for life’s unknowns today! Situationally forced retirements are often taken under less than ideal circumstances and can be the most difficult to accommodate.
Your Emotion
The second is your emotion. Under the new administration, many Feds have many new emotions about their workplace. Allowing them to influence the timing of your retirement can be from the “fed-up effect” (no pun intended)– where you have finally had enough, it may be from the “over eager effect” – when you can’t stop dreaming of endless Saturdays, the “retirement FOMO (fear of missing out) effect” – where you enviously watch your retired peers enjoying themselves, or the “anti-longevity effect” – where you worry you won’t get to enjoy retirement long enough if you continue to wait!
Emotions can cloud sound judgment if you allow your objectivity to be the victim of your mood. Don’t let them lead to a retirement decision that is not ultimately in your best interest. Emotions change but your retirement income can’t. It is critical to make sure that your decision is objective because the worst emotion in retirement is regret.
Information
The third is information (or misinformation).
Are you getting accurate information from which to base your decisions? Does your financial coach know all the rules of the federal retirement game? Does your HR department? Who is helping you put all of the pieces of your retirement puzzle together? There are many misnomers out there, myths and misunderstandings, that feds (and even some of their financial coaches) can falsely believe to be true.
I just had a client who’s financial advisor AND tax attorney thought they had beat the system, they were writing a letter to the IRS explaining why this individual didn’t owe income tax on a qualified IRA that was being emptied to buy back military time… but none of these “experts” knew that retirement contributions into the FERS, CSRS, and Military Retirement systems are all made with after-tax dollars. This client’s previous coaches were highly regarded in the private sector but neither had adequate knowledge of the federal systems to know that they almost cost this individual thousands in taxes, penalties, and the added expense of IRS private letter rulings had he not gotten a second opinion from me and stopped just days before finalizing the transaction.
Retiring on bad information is like starting a road trip following a terrible map, you might set out confidently but eventually the realization that you don’t have enough gas to reach your destination will be a rude awakening. Interview Federally Focused Financial Advisors, attend the retirement seminars and workshops, read about the TSP, use OPM’s calculators, ask your mentors, join NARFE, and double check everything!
Your Finances
Finally, we come to the only of these 4 motivations that can ensure a secure retirement: your finances.
If you have been blessed with control of your own destiny, rather than having it dictated by your situation; if you have kept your emotions from affecting your objectivity, rather than storming out after a bad week; if you have confidence in your financial coach’s retirement income plan, rather than settling for your best “guesstimation” of your fixed income… then we can objectively make the decision to retire based on the ability of your retirement assets to sustainably meet the retirement income needs of your desired lifestyle. George Foreman famously said, “Its not at what age you retire, it’s at what income.”
If you never had to spend another minute of your time working, or waste another drop of your energy on the job, or shelf your passions any longer to make ends meet… how would you impact the world?
The true secret of a fulfilling retirement is establishing the freedom to donate your time and energy improving the lives of loved ones, to volunteer at your church or charity, to strengthen relationships with your friends and in your community, to develop your passions, to see the world, and to teach the lessons you have learned to our young leaders of tomorrow – but that freedom can only be achieved when your personal finances no longer consume your time and energy.
Take a moment to truly reflect on your motivations, rank all four of these categories by which has the biggest impact on your decision. If your finances do not top the list of reasons to retire then it is critical reevaluate your motivations and review your options. You only get one shot at doing it right! If you are currently unsure as to whether your assets can sustain your lifestyle throughout retirement then contact WalkerCPG for a free consultation and Retirement Income Forecast today!
