The_Best_Age_To_Retire
00:00:00.000 | Hello everybody, it's Sam from Financial Samurai and in this episode I want to talk about the best
00:00:04.720 | age to retire to minimize regret and maximize happiness. Because I just spent about an hour
00:00:10.880 | and a half updating a post I wrote in 2018 about this subject and I was 41 years old at the time
00:00:18.320 | and now I'm 45 years old. And during the process of updating I realized a couple things that I
00:00:24.160 | wanted to share with you. First of all, to get it right off the bat, I believe the ideal retirement
00:00:29.920 | age, the best age to retire, is between ages 41 and 45. By this age range most will have had 20
00:00:38.400 | plus years to save and invest. Most will also be healthy enough to explore the world and do the
00:00:44.400 | things they've always wanted. And so I came up with this thesis when I was 41 years old partly
00:00:51.440 | because I felt that, ah, if I had just waited until 41 years old instead of retiring at 34 years old
00:00:58.720 | in 2012, I would be richer and have less regret and so forth. And so this is kind of a self-reflective
00:01:05.600 | post but also a post to help you figure out what the ideal retirement age is as well.
00:01:10.240 | And so now, four years later at the age of 45 in 2022, I'm revisiting this topic to see whether 41
00:01:19.600 | to 45 is indeed the ideal retirement age. And my quick conclusion four years later is that yes,
00:01:27.440 | 41 to 45 is a sweet spot for taking it down a notch, doing something different, taking a long
00:01:34.080 | break, retiring forever if you want to. Just to recap and get a baseline, 51% of Americans between
00:01:42.880 | the ages of 61 and 65 retire and 63% of Americans retire between the ages of 61 to 69. Given we want
00:01:52.240 | to live a better than average life, it's logical to conclude the ideal retirement age should be
00:01:58.000 | at least below 61 to 65 where 51% of Americans retire. Now some of you might say, "Oh, I love
00:02:05.520 | my job. It's awesome." But survey after survey from Gallup Poll have showed that most Americans,
00:02:12.240 | about 70 to 75% Americans, are disengaged from work. They're just not interested. They're just
00:02:18.560 | going through the motions to get that paycheck, that retirement savings contribution, and to get
00:02:24.480 | subsidized health care and other benefits. And on the other end, 18% of Americans retire before the
00:02:30.240 | age of 54. Thus, the ideal retirement age should also be under age 54. Now that I am 45, I've
00:02:40.000 | noticed several things since 41 years old. One, I'm much wealthier than I was four years ago,
00:02:46.160 | thanks to the bull market and thanks to consistent saving and investing. This added wealth makes me
00:02:52.720 | feel more financially secure, especially with two children. And what's also interesting is that the
00:02:59.600 | wealth, the absolute dollar wealth amount has increased much faster because I have a larger
00:03:04.480 | capital base to earn returns. Two, and more importantly, my health is starting to fade
00:03:11.840 | just a little bit. During the pandemic, I had some breathing issues, shortness of breath. It
00:03:17.200 | might have been due to anxiety, you know, a lot of things going on in 2020 especially. I'm not sure.
00:03:23.120 | Actually, the doctor said there's probably a relapse of my asthma that I had as a kid. So
00:03:28.160 | that's coming back a little because he said people who have asthma as kids tend to relapse after the
00:03:34.000 | age of 40. Noticing my health decline a little bit is a little bit alarming, but it also reminds me,
00:03:41.520 | okay, mortality. Father time waits for no one, right? So you got to make the most of life now.
00:03:48.800 | Oh yeah. And I also have this popping hip issue. I've been playing tons of pickleball along with
00:03:55.360 | tennis now. So before I would play tennis twice a week for an hour and a half to two hours each
00:04:00.800 | time, rest in between. Now I'm playing tennis twice a week, but I'm also playing pickleball
00:04:05.760 | two to three times a week, which is an extra, let's say four to five hours of exercise.
00:04:12.080 | And my body has reached that limit where I don't know, the muscles are strained,
00:04:15.920 | tendons are strained. It's just popping my left hip back and forth. And usually it doesn't hurt,
00:04:21.520 | but sometimes I'm like, oh, oh. So again, these physical ailments remind me that time is finite.
00:04:28.800 | And then finally, time really is finite. It's an awareness that let's say you're at 45 years old
00:04:34.400 | and you live till 90. Every single year you live is literally twice as fast or twice as precious
00:04:40.320 | as the first year of life you live, right? One divided by 90 is half of one divided by 45.
00:04:48.000 | None of us really know when we're going to die. But while I was doing some updating and research
00:04:52.880 | for this post that is linked in the show notes, I looked at the death rate in the United States
00:04:57.520 | in 2019 by age and gender. And it says per 100,000 of population between the ages of 45 and 54,
00:05:07.440 | the death rate is 490 males and 297 females. But that significantly jumps between the ages of 55
00:05:15.520 | to 64 to 1,112 for males and 670 for females. And then it more than doubles again in the next up
00:05:25.520 | age range and then it more than doubles again and so forth. I'm not exactly sure how to interpret
00:05:32.000 | this data because for the age range 85 and over, it says, let's say the male death rate out of
00:05:37.520 | 100,000 population is 14,229. That doesn't make sense if the median life expectancy is about 80,
00:05:45.040 | 81. It should be much higher that rate. But regardless of me understanding this data or not,
00:05:50.560 | what I'm looking at is the change in the number. How does it go from one age bracket to the next?
00:05:58.320 | And that change really starts accelerating after the age of about 40, 44. That fits very well into
00:06:07.200 | my thesis about the ideal retirement age at 41 to 45. Because obviously, if you die at 45,
00:06:14.160 | you're going to be really bummed if you're working until 45. You won't be able to do everything that
00:06:19.440 | you wanted to do. And at 65, okay, that's the traditional retirement age. You know, that is
00:06:25.680 | where you could die then, or hopefully you'll live until the median life expectancy of 80 plus.
00:06:30.880 | Nobody really knows. So retiring early is a hedge against an early death. And that's why if you
00:06:36.960 | retire by the age of 45, hopefully you will have between 15 to 35 years of relatively healthy
00:06:44.800 | living so you can enjoy your retirement. Now, so far, I've talked relatively subjectively about
00:06:51.680 | the ideal retirement age. But if you click over to the post, you'll see me try to quantify the
00:06:56.640 | ideal retirement age using four variables. First variable is income, freedom, potential,
00:07:03.920 | return on education. I essentially assign a score of between one to 10, 10 being the highest.
00:07:11.440 | And then I have a chart by age and then I total these variable scores. And then whichever age
00:07:18.160 | bracket has the highest total score wins. So for example, between ages 20 and 25, I assign an
00:07:25.840 | income score of one because you likely make the least amount of income at any point in your life,
00:07:31.680 | maybe not after like 85. But yes, probably at any point in your life, because hopefully your
00:07:36.000 | retirement income will be greater than your income between the ages of 2025. Now with freedom,
00:07:41.440 | I assign a 10 because it's awesome to do whatever you want at 2025. You don't have a lot of
00:07:47.840 | responsibilities, your potential I sign a three, this is subjective, you know, three, you have
00:07:53.200 | potential, but it's not that great yet, because you don't know that much. And then return on
00:08:00.160 | education. Well, you spent how many years 13 years going to grade school, then you got college,
00:08:05.840 | that's a long time. So if you're going to retire between the ages of 2025, that return on education
00:08:11.440 | is very low. So I give you a one and your total score is a 15. But if I look at my 41 to 45
00:08:18.080 | bracket, I'm giving an income score of nine freedom score of six potential of 10 return on
00:08:24.720 | education of nine. So you get a score of 34. And voila, there it is the ideal retirement age. But
00:08:31.600 | to be frank, I'm kind of reverse engineering this as well to try to look backwards and see
00:08:37.520 | what makes sense. Finally, I do want to say the sooner you retire, the busier you will probably
00:08:43.520 | be in retirement. Because you'll be younger, you'll have more energy, more interest, more things you
00:08:49.280 | want to do. For example, here's some of the things I've done post retirement since 2012. I've traveled
00:08:55.840 | to 30 new countries in Europe and Asia with my wife. Angkor Wat, Cambodia was truly amazing. You
00:09:02.160 | got to check it out. Just summertime is really brutal, the humidity and heat. For sports, I got
00:09:08.720 | my US Tennis Association ranking up from a four and a half to a 5.0. This is a top 1% level. And
00:09:15.680 | it wouldn't have been possible with all the free time spent practicing my backhand and my volleys.
00:09:21.040 | Three, let's see, I consulted for several FinTech startups ranging from series C to series C. It was
00:09:28.240 | pretty interesting, you know, seeing the startup and tech world. This is a world that I have never
00:09:34.000 | truly fully been immersed in, even though I've been living in San Francisco, since 2001. Four,
00:09:40.800 | I became a high school tennis coach. It was really fun coaching teenagers and seeing, you know,
00:09:46.240 | what the school system is like. Five, I became a father of two children. This is the greatest joy
00:09:53.200 | and the greatest challenge ever. And then finally, I wrote an instant Wall Street Journal bestseller
00:09:58.880 | called Buy This, Not That, How to Spend Your Way to Wealth and Freedom. So I did all these things
00:10:03.520 | because I wanted to do them. And I very surgically cut out the things I didn't want to do. And I
00:10:10.000 | distanced myself from other people I didn't want to hang out with. So yes, I would have made more
00:10:15.120 | money and I would have been richer had I worked for five more years. But I've minimized regret
00:10:22.320 | by doing other things and spending the time how I saw fit. Once you reach your 40s, you will start
00:10:28.880 | to feel the importance of making every moment count. Even with a family to support, money
00:10:34.640 | depreciates in value while time appreciates in value. It's never more apparent than by 45. So
00:10:42.160 | find the point where the lines intersect and you will find your ideal retirement age. I'd love to
00:10:48.560 | hear your thoughts in the comments in the post or an email what you think best ages to retire.
00:10:54.160 | When you retired, did you go the traditional age of 60 plus? Or did you go earlier? Did you have
00:10:59.600 | any regrets? What would you have done differently? This is a journey and I love chronicling the
00:11:04.720 | journey because we don't know what we don't know. And I'm saying at 45 years old, between the ages
00:11:10.640 | of 41 and 45 is the ideal time to retire, take it easy, live life, do something else. There's always
00:11:19.520 | another dollar to make, but there's never another second of time. If you're looking for some great
00:11:26.080 | retirement planning tools, my favorite is Personal Capital. I've been using them since 2012 to track
00:11:32.000 | my net worth and also plan for retirement. You can check them out at financialsamurai.com/pc
00:11:37.040 | and also check out New Retirement. New Retirement was built from the ground up
00:11:43.520 | to be specifically for retirement planning. It's very customizable, a lot more features,
00:11:50.160 | and it will empower you to live a more confident retirement lifestyle. You can check them out at
00:11:55.280 | financialsamurai.com/nr for New Retirement. Thanks so much, everyone. Until next time.