What is the right age to retire?

Dinesh is a chartered accountant with his own firm. He will soon be turning 50 and retirement is on his mind. His children are about to finish college. He has been putting aside some funds on a regular basis to build a retirement corpus. He has also bought life insurance to provide for his wife in his absence.

As a self-employed individual, he is not sure when he should call it quits, since he is not compelled to follow the traditional cut-off age when it comes to retirement. What are the factors that Dinesh should consider while deciding his retirement age?

Given the rising life expectancy and healthy lifestyles, people’s attitude towards age have undergone a sea change. More and more people are actively choosing to work in their 60s. Dinesh might also want to delay his retirement and choose to work well into his 60s, if his health and stamina permit. He could also consider a phased retirement—a luxury that he can enjoy due to the nature of his profession.

After all, this will mean a few more years of active work and the accumulation of a larger retirement corpus. Who wouldn’t prefer a gradual transition from being ‘very busy’ one day and ‘bored and isolated’ the next? From an emotional standpoint therefore, the trade-off to be evaluated is between the benefits of working and the joy of leading a life of leisure.

The other key factor to consider is whether or not Dinesh can afford to retire. Will he have any financial responsibilities when he retires—his childrens’ higher education, their weddings or any outstanding debt? If so, will he have provided sufficiently for them? He will also need to consider the size of his retirement corpus, the adequacy of his life and health insurance, visibility of post-retirement income, and assessment of household cash flow and budget.

Clearly, there’s more to taking the retirement call than just age. Family, attitude, finances and lifestyle are all significant factors. Dinesh also needs to be sure that he won’t regret his choice later. Despite all the planning, there may be risks such as physical disability, a sudden turn of events or outliving his assets. He should be mindful of these possibilities and have a ‘plan B’ ready, just in case.

(The content on this page is courtesy Centre for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.)