How do you know when you’re ready to retire?

There’s no magic warning light that comes on in life telling you it’s time to retire, and the templates we used to map our lives to have been broken by increasing longevity – leaving us with no real ‘retirement age’.

Instead, we are limited by how our body, mind and spirit hold together in the second half of our life. That means choosing the right time to retire is in your hands – or, at the very least, it could be, if you are proactive.

It used to be that knowing when to retire was a relatively simple calculation, but these days its much more complex.Credit: Getty

The reality is people aren’t proactive enough. Only 31 per cent of people retire by choice in Australia today. The rest are retrenched or retire for one two other reasons – their health declines, forcing them to; or they must care for a loved one whose health is declining. When you don’t choose retirement consciously, it can be much more difficult to adapt to.

When I speak to employers with an older workforce, they want people to be more proactive too. More employers than ever say that they’d like their employees to better understand how to build financial security for retirement in midlife.

Then, they’d like them to contemplate their choices as they reach that financial security that allows them to lean into the good bits of life a little more. They point out that they’d rather not push people who are struggling with cognitive or health issues into redundancy or retirement.

They’d much rather people choose to enter the next stage of their life with goals in place, excited about their plans before their health or cognitive ability declines. So, how do you know when you’re ready to retire?

1. You’ve worked out when you’ll have ‘enough’

Knowing how much money you think is enough for you to retire, or to start stepping back from full-time work is important. Everyone approaching retirement should know their ‘enough number’ – how much they need to retire at the standard of living they are satisfied to live at for the rest of their lives.

You calculate this by understanding your assets and liabilities, building your cost-of-living budget and laying out how much you’ll need to chase your epic retirement dreams; and finally, by projecting the income you can make each year from your financial assets – superannuation and investments.

Then, lay that alongside any age pension you’ll be eligible for. Most people look to replace about 80 per cent of their pre-retirement salary.

There’s an opportunity to talk more about how a well-supported, flexible and progressive approach to retirement can be good for everyone.

Knowing how much is enough to retire, or to start stepping back from full-time work, and understanding when you might reach that point gives you the power and the confidence to plan for the exciting years ahead and start to bring those plans to life.

Remember, you don’t have to retire when you get to ‘enough’, but knowing you have the choice can be extremely empowering.

2. You understand how your money will work in the next phases of life

If you’re contemplating part-time and later full-time retirement, you need to know how money works after you stop getting a large pay cheque.

This requires you to understand your income sources well, and know how you’ll layer them together to create an income stream you can rely on. In the first years, while you’re still working part-time, you might use a transition to retirement income stream which allows you to access up to 10 per cent of your super as an income stream from the age of 60.

Or, if you meet the conditions of release, by passing the age of 60 and leaving your job, you can shift your superannuation into retirement phase. Or, you can keep working after 65 and access your super unconditionally.

And finally, access to the age pension kicks in from 67, if you’re eligible, which can be a big help in lifting your retirement income.

3. You recognise if you’re feeling dead inside

Not everyone feels this – but some certainly do as their retirement starts to call them – a sense that you’re just going through the motions every day, doing what needs to be done but without any real motivation to keep up with the changes in the workplace or stay at the forefront.

Work might seem like it’s lost its spark, or like your routine has become a never-ending rut. I call this trigger ‘inner death’ because that’s exactly what it feels like.

The excitement of work is gone, nothing ignites your curiosity, nothing gives you a sense of achievement, and your passions feel neglected – or you feel dispassionate. You might even feel like your life is focused on things that just don’t seem to matter anymore.

4. You have built up some other priorities to look forward to

Have you ever met someone in pre-retirement who is excited about their upcoming trips, their incoming grandchildren and their exciting and relatively new pursuits, and they can’t wait to have more time for each?

I want you to try to become one of these. You do that by consciously investing in your interests outside the workplace, your family, and things that stimulate your curiosity as you head through midlife and into the years before retirement calls.

It’s healthy to keep learning, growing and building your interests and not all of them should be aligned with your career any more because one day your career will not be the most important thing in your life.

5. You contemplate taking it slow – but not stopping

Retirement doesn’t mean stopping work altogether any more. There’s increasing support from employers and employees for a period of life where we work with greater flexibility – and perhaps that allows us to work longer in life, but with less pressure to work full time through our later years of life.

Government legislation obligates employers to support their staff with flexibility after the age of 55. Most employers see it as a healthy move for employees to embrace part-time work before they retire fully, partly to help them adjust, but also to help the employer better manage the transfer of knowledge from people with a lot of valuable experience.

I think there’s an opportunity to talk more about becoming retirement ready – and how a well-supported, flexible and progressive approach to retirement can be good for everyone – employees and employers.

Employees get to plan more openly for a period of part-time employment where they can right-size their work with their other goals in life, gradually building their interests outside the workplace. And workplaces get to better manage the transition of knowledge in their workplaces, rather than have it all walk out the door on one day in December.

Bec Wilson is the author of bestseller How to Have an Epic Retirement. She writes a weekly newsletter at epicretirement.net and is the host of the Prime Time podcast.

• Advice given in this article is general in nature and is not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making financial decisions.

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