Can You Afford to Retire or Switch Jobs?

Now that the pandemic restrictions are being eased, many employees are getting ready to return to the office. In the past couple of weeks, I have received many calls about people who are rethinking what they want to do for the rest of their lives.  Many people can't see themselves doing the same commute that they did pre-pandemic, and others have enjoyed having more time to pursue hobbies outside of work.  

Some of my clients are considering retirement, and maybe not even stopping work entirely, but doing something completely different on a part time basis.  Some of my younger clients are thinking about switching jobs or careers since many new opportunities will allow them to work at least partially on a remote basis.

It is really important to look at your financial position and your goals before making such a move.  in some circumstances, people who have options or restricted stock that has not vested may be leaving money on the table that they have not thought about.  In other cases, it is important to look at how much income you need each year to make the appropriate decision.  For people who are nearing retirement age, it is important to consider how they will pay for insurance if they are no longer covered by a work plan. For younger clients, they need to compare not only the expected salary of the new position, but also to compare the benefits.  For example, if the current position offers health insurance at a cost of $400 per month to the employee, and no match on the 401K, a new position might cover almost all of the health insurance and have a match of 100% of the first 4% and 50% for the next 3%, which is essentially free money!  I always advise looking at the total compensation and benefits and not just the new starting salary. It is sometimes possible to save much more causing their financial plan to look  better than choosing the offer with just a slight salary increase.

For clients considering retirement, we need to consider how much they will be able to spend each year and develop the best and most tax efficient strategy for withdrawals to cover their living expenses.  We also need to look at the optimum time to begin taking social security, as some people can afford to wait and potentially obtain an 8% increase each year after full retirement age until they reach age 70, while others need to begin taking the reduced benefit earlier to fund their living expenses. A Certified Financial Planner can help you to calculate how much you would be able to spend in each year of  retirement so that you can make the best decision based on your financial goals. It is also nice to know how much you are able to spend each year so that you can actually enjoy your retirement and not feel guilty about spending on travel, a second home or entertainment. It is very difficult for most people to do this until they have seen the projections and understand how much they are able to spend over the remainder of their plan. This gives people the freedom to enjoy their retirement lifestyle, and to realize that if they don't intend to spend the rest of their money, they need to make decisions relating to how they would like to have it distributed in their estate planning documents.

If this is something you have been considering, please contact me to set up an introductory call before making a decision that might not be in your best interest. 

About the Author

Patti Hughes is a Chicago Fee-Only Financial Planner.  Lake Life Wealth Advisory Group provides comprehensive and objective financial planning, retirement planning, and investment management to help clients organize, grow and protect their assets through life’s transitions.  She is a fiduciary, and does not sell products or earn commissions, so she truly acts in the best interests of her client