Finding the right answer for you is vital. If you are overly optimistic and retire too soon, you risk running out of money before you run out of life. Conversely, if you are too cautious, you can spend valuable years of your life toiling away at a job you don’t love.
The answer may be complicated, though. It relies on making reasonably accurate predictions on everything from future investment returns, interest rates, inflation, social security, lifespan, and health care costs. Each of these factors is highly unpredictable. And each, is at least partially, out of your control.
Darrow Kirkpatrick recently released Can I Retire Yet? to help guide readers through the process of answering this question. His book combines extensive analysis of research and theory with his personal approach and experience. He aims to teach you “how to make the biggest financial decision of the rest of your life.”
As someone focused on early retirement, the book was a perfect fit for me. Here’s my review.
Personal finance advice and literature is loaded with conflicts of interest. Because of this, I always try to learn about the author to get a sense of their motives. Kirkpatrick’s background is very interesting.
At age 50, he retired from his career as a software engineer. He is an experienced rock climber and enjoys mountain biking. He also states that his top priorities are “simplicity, safety and reliability.”
These statements may seem conflicting. Retiring more than a decade earlier than most people — while scaling up cliffs and racing down mountains in his spare time — equates to being a big risk-taker in the eyes of many. It seems the opposite of safe and reliable.
However, there is a saying: “There are old climbers, there are bold climbers, but there are no old bold climbers!” Climbing, like retiring successfully, is ultimately about assessing risks accurately.
Consistent with his background as an adventurer, Kirkpatrick never oversimplifies things by labeling them “safe” or “risky.” He emphasizes that every decision you make has risks, which must be managed or accepted to achieve the outcome you desire. This theme is consistent throughout his book.
More Questions Than Answers
Some readers may find Kirkpatrick’s approach frustrating. If you are looking for simple answers to questions like, “What should my asset allocation be?”, “How much money do I need to retire?”, or “What should I assume my tax rate will be in retirement?”, you won’t find them here. He purposefully avoids giving overly simplistic, one-size-fits-all answers.
“Can I Retire Yet” is not even designed to give a simple yes or no answer to its title’s question. Instead, Kirkpatrick tries to ensure that his readers ask the appropriate questions in order to make their own, unique retirement decision. He then teaches how to analyze all of the key factors that influence success or failure in retirement planning. The aim is, ultimately, to allow readers to pull all of these complex factors together and make an informed decision for themselves.
Just The Facts, Please!
The retirement decision is inherently unclear from the start. There are many unknown factors that can affect your success. Creating even more confusion is that many of these issues — such as social security, Medicare, “Obamacare,” interest rates, and inflation — are tied to political outcomes and ideologies.
It is also very difficult to find unbiased guides and analysis from which to base your decisions. Much of the information found through available services and products must be taken with a grain of salt. A number of them present a conflict of interest, as they are “educating” you while also selling to you.
Just as Kirkpatrick avoids using the words safe or risky, he also rarely uses always/never, good/bad, or should/shouldn’t. Instead, he provides Best Case, Worst Case, and Most Likely scenarios for retirees when analyzing unknowns.
Resource: Financial Freedom Calculator
Kirkpatrick manages to provide useful analysis of politically-charged issues. He avoids much speculation and accompanying extreme viewpoints. For example, he provides useful insight and practical advice on the topics of social security and taxes in retirement. He also does a great job of explaining the tax planning requirements and potential benefits for early retirees with the affordable care act, a.k.a. “Obamacare”, while staying above the political fray.
His viewpoint is neutral, coming from an educator who is already financially independent. It eliminates most, if not all, of the typical conflicts of interest faced by many who write about financial topics. Rather than tell you that you should or shouldn’t use a financial advisor, he simply presents potential positives and negatives so you can make your own educated decision.
He takes a similar approach to financial products such as annuities and reverse mortgages.
Theory Into Practice
The book is divided into 5 sections.
- Sizing up your retirement expense
- Understanding your retirement income
- Retirement math
- Analyzing the future
- Navigating your journey
I found the entire book useful, even as someone who has already spent considerable time and effort on the topic of retirement planning. However, I found the final section to be most interesting and unique.
Kirkpatrick emphasizes that models, calculators, and “expert” advice are essentially meaningless once you enter your retirement. He discusses real world applications to the research and theory presented earlier in the book.
He also reiterates that even after making the retirement decision and leaving your career behind, you must continue many of the same processes that got you to retirement in the first place. These include budgeting and/or tracking expenses, monitoring investments, and managing your cashflow. He shares very practical ways to monitor your finances into retirement and make modifications as needed.
The final chapter was particularly powerful. One quote really summed up why, beyond numbers, the retirement decision is so difficult: “None of us knows for certain just how much longer we have left.”
Darrow Kirkpatrick’s book proves to be an excellent resource, regardless of where you are on your journey to retirement. He integrates a thorough overview and objective analysis of all the key factors that will determine retirement success or failure. He combines current theory and research with real world application. The book is useful for planning early or traditional retirement.
This book will not give you a simple answer to the question “Can I Retire Yet?”. But it will give you the knowledge and tools to make an informed decision for yourself.
Have you read the book? How did it help you with your retirement planning?