The Delicate and Difficult Decisions Behind Retirement

How do we know when we can retire?

A lot of people seem to make it very simple, but I have a hard time believing it’s that easy. There are a lot of decisions that need to be made before we can even figure out what we need to retire. 

A Few Questions

Do we want to pay for our kids’ college? How can we pay for college, and how much of the college expenses do we want to fund?

What are our personal expenses now and after we retire?  What will our medical costs, travel costs, and housing costs look like after we retire?

Do we have family members that will depend on us? Do we need to move? Are we going to downsize our homes because the kids moved out? Do we need to make modifications to our homes as we age? Should we budget for those?

How much do we want to travel? Can we forgo travel if our investments do poorly?

Can we spend more if our investments do well?

What if I can’t stand my job? How long do I have to work to get out of a job I hate?

What if I love my job? Should I save less because I’m planning on working as long as possible?

If I don’t save enough can I go back to work? Will I still have the skills to do my old job?

Can I get another job after financial independence to provide a buffer for my retirement income?

Can I start my own business after financial independence? How much money do I need and how long can I live on that money if my business fails? 

Can I start my side business before I retire and have it supporting my family when I reach financial independence?

What kind of sacrifices do I have to make to retire when I want to?


All of these questions are important if you want to make good decisions. I don’t write this to make you upset or worried because following the good financial principles written on this website and others will get us a long way toward funding retirement. The trouble is we can’t predict the future and we can’t account for everything. At some point, we have to take a leap of faith. 

We can make educated decisions and try to plan the best way possible to make those decisions count. There are some key variables that will help us make these good decisions. 

The Variables

Here are the main variables someone should look into when deciding what he needs and what he can do once reaching financial independence and ultimately retirement. 

  1. Savings rate
  2. Current monthly expenses
  3. The Multiple of Retirement Expenses we Want/Need (in other words withdrawal rate)
  4. Post Financially Independence/Retirement Monthly Expenses
  5. Investment Rate of Return
  6. How Long a Current Job/Career can be Tolerated

That’s it. If you know these variables and prioritize the most important ones, you can figure out the others. Sure, we had to go through most of the question we just discussed, but once we know the answers we can figure out the variables. 

Let’s Look at an Example

Jack is a 22-year-old engineer married to Diane, a 23-year-old MBA. 

Household expenses are $70,000 a year living in Heartland, Nebraska.

After tax income is $140,000.

They save $70,000 a year.

After retirement expenses are expected to be reduced to $40,000 a year due to paying off the mortgage and student loans.

They both absolutely hate their jobs and want to be done with them asap. They don’t care about making money after retirement and he wants to surf all day and she loves making sun catchers.

The Delicate and Difficult Decisions Behind Retirement

Oooh. Pretty!

How long do they have until retirement?

Well if they are comfortable with a 4% withdrawal rate, they need a million bucks ($40,000 post-retirement expenses).

If they save $70,000 a year at a 6% rate of return, they are 10.6 years away from quitting their jobs assuming no raises and no increases in the cost of living.

HIP Ultimate Retirement Calculator

Here is the calculator for you to use. If you would like to download it, just sign up for the email list and you get a link in your email to make it your own.

Get your HIP Ultimate Retirement Calculator!

I’ve set it up to calculate the time it will take to reach your goals, the amount required to retire, and the after-tax savings rate since that is what most people have problems figuring. It’s easier to see what we save and what we spend. The hard part is figuring out how much time we need to get to where we want to be.

Let’s Change it Up

Now let’s pretend that the lovely couple can’t tolerate another second in their current jobs. He wants to become a surf instructor and she wants to teach arts and crafts down at the local community center because that is pretty close to their retirement goals. (I wonder what the demand for surf instructors is in Nebraska.)

Their new after-tax income is cut in half to $70,000. If they did this, they would immediately cut their expenses down to the post-retirement $40,000 level.

Their savings changes to $30,000 a year instead of the previous $70,000. Now, they are loving life so they decide to go all stocks and predict they will have an 8% rate of return on their investments since they are willing to take more risk. They don’t care if they have to work longer because they are living the dream, sort of.

At least he gets to surf every day, and she is making so many sun catchers at the community center they don’t know where to store them all.

The Delicate and Difficult Decisions Behind Retirement

Anyway, now they need to work 16.9 years to retire. With that information, they can make a better decision. The can either work about six more years in jobs that are much more enjoyable and make some cost of living sacrifices or work the original 10.6 years in jobs they hate but spend more.

That is only a decision they can make, but at least they have the facts to help them make a good decision. The possibilities are endless. Other folks might be comfortable with a 3% withdrawal rate. You can look at the probabilities for each at


Ultimately, it comes down to flexibility. If we are flexible and enjoy the stage of life today, we don’t have to chase that golden carrot of financial independence and early retirement quite as quickly. If that is a big goal for you that is fine too. We can set our goals and try to maintain them. If life throws us a curve ball then make an adjustment. I try to make the life I have today a little closer to the life I consider ideal, but I make the most of what I have. 

When we have kids, there are going to be some sacrifices and compromises when it comes to saving for retirement. When you have a house, that presents another set of variables. If we love the mountains or the beaches, that makes living expenses change.

Maybe the Internet Retirement Police will get mad at me, but I’m trying my best to enjoy where I’m at and get rid of the things I don’t enjoy. I keep saving and eventually, retirement will come. It might be sooner or later than I originally planned, but I’m enjoying the ride.


Use Personal Capital to track all your expenses and retirement savings all in one place.
The Delicate and Difficult Decisions Behind Retirement


What do you think of the calculator? Did it help? How do you approach saving for retirement? I’d love to know your thoughts.

Tom is a doctor, husband and father of five with a passion for parenting and finance. When he isn't skateboarding, riding BMX, or jumping on the trampoline with his kids, he is reading and writing about personal finance. He helps high income parents educate and mentor their kids to become financially, emotionally, and intellectually self sufficient.

6 Responses to “The Delicate and Difficult Decisions Behind Retirement

  • I don’t know about the others. But I think the biggest thing people mistakenly get mixed up is how they’d feel after retiring. Like it’s going to be some sort of panacea. Mostly, IMO, it’s because they don’t like their current job. And it’s also most likely tied to lack of autonomy. For people like me, I get too depressed if I’m not adding value in some way or another. So work, in that sense, is fulfilling. So maybe it’s more a question of should we all be chasing FI or RE? I think for me it’s FI. RE doesn’t seem fun to me.

    • I agree with you. FI is a much bigger priority for me than RE.
      I guess if you want to do something that is really hard to make money doing and being younger is more beneficial like hiking the pacific trail or surfing full time then there is more of an urgency. That comes back to the decisions though.
      Prioritize making money quickly and at a young age. Minimize expenses and retire early.
      If you’re like me and like to do some traveling, raise some kids, practice your profession and enjoy community then retiring early isn’t as urgent.

      Tom @ HIP

  • I’m a sucker for excellent calculators. I am going to have to play around with this. BTW…love the Jack and Diane reference. I have an earworm now of that song 🙂

    • Glad you liked my little ditty. 🙂
      I’ve been looking for a calculator like it and have never been able to find something like it.
      I had to dig out my algebra book to figure out how to solve for an exponent. Who knew the log function would come in handy one day. 🙂

      Tom @ HIP

  • I was more gung-ho about early retirement before children came into the picture. My wife and I always dreamed of traveling months or years on end, but I don’t know if the children would enjoy it, or frankly if it’s fair to them.

    Now, FI to me looks more like part-time work in an area I never lived but always dreamed of: West Coast, Rocky Mountains, Hawaii. I’m lucky that in radiology I can work remotely as long as I have computer access.

    As my nest egg grows and I approach FI, I actually feel MORE uncertain about what the future holds, but in an exciting rather than fearful way.

    Dr. C

    • I agree with kids complicating the picture for sure. We moved around a fair amount when I was a kid and when we finally settled down when I was in high school I really appreciated the fact that I had my whole high school career in one place. I guess that might be more important for introverts but every time the Mrs. and I think about selling everything and traveling the world the kids kinda freak out.
      It would be interesting but for now I still like where we are and the community we have. I think it’s probably a case of the grass might be greener someplace else but it probably isn’t 🙂 Thanks for stopping by.

      Tom @ HIP

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