Retirement Planning
September 21, 2023

Knowing When You’re Not Ready to Retire

Many of us dream about when we’ll be ready to retire. But how can you tell when you’re not ready?
Stewart Willis

Years ago, I was hanging out in the casino of a cruise ship. The cruise line was very family-friendly and had lots of strict rules to make the environment appropriate for children, including a prohibition on swearing; that would get you kicked out of the venue.


Imagine my bemusement when I saw one man loudly swearing every time he celebrated a win, but not even being reprimanded by the staff. He definitely had reason to be excited; he was in the middle of a lucky streak in which he’d turned $10,000 into $200,000. That’s why he wasn’t ejected for swearing; the casino wanted its money back! It was a winning strategy for the casino; within two hours, the man’s stack of winnings had evaporated. He started losing, then stayed too long trying to regain his winnings.


There’s an old song from the great Kenny Rogers which reminds people that it’s important to know when to walk away. Rogers was talking about gambling, but it’s a good thing to keep in mind when investing as well. Today, we find ourselves in an economic environment where if you are basing your retirement strategy on the returns we’ve seen in the last couple of decades, you’re likely to sorely regret it.


Some would-be retirees are basing their assessment of when they’re ready to stop working on the assumption their investments will make 10–20% returns in retirement. It’s a nice thought. If your money is increasing by 20% each year, and you live on those increases without having to touch the principal, you’ll never run out of money in retirement. But the first word in that sentence is an important one which many gloss over. Put another way, that’s a big “if!”


Many are still spoiled by the incredible gains in the stock market that existed before today’s economic volatility. However, those are gone. The wise investor should not assume they will come back with such vigor any time soon. Retirement strategies based on the need for, at minimum, 10% gains per year should now be seen as dangerous.


We can learn a valuable lesson from history here. 2000 to 2012 is considered in financial circles to be the “lost decade.” The S&P 500 made essentially nothing over that time. The stock market didn’t return to 2000 levels until2016. Picture the person who retired in 2000, assuming to be able to take 10%out of their money each year based on 10% market gains that were no longer happening.


If you take 10% of your initial nest egg out to live every year and your nest egg never grows, you will run out of money in a decade. That’s not a position you want to be in, especially considering the average retirement lasts about 20 years in the United States.


You need to know when to walk away from a retirement strategy that no longer has an acceptable likelihood of success. If you decide you’re ready to retire based on savings that would support your desired retirement lifestyle only with consistently significant market gains, it’s likely you aren’t actually ready to retire.


Many retirement savers are goals-based. They read an article that says something like “You need $1 million to retire comfortably,” then believe that all they have to do is have $1 million saved and they can retire. The problem with articles like that is, they aren’t individualized. They don’t — cant’ — take into account peoples’ unique circumstances.


Some people do need $1 million to retire. Some need more, and others need less. If you plan to retire somewhere that has a very low cost of living, and all you want to do is sit in a rocking chair reading old books, you may not need anywhere close to $1 million. On the other hand, if you plan to retire to a Manhattan penthouse and only dine at Michelin-starred restaurants, you’re going to need quite a bit more.


A more effective assessment of retirement readiness is to model your expected cashflow. The best way to do this is with a financial advisor; the advisors at Asset Preservation Wealth & Tax have access to cash flow systems which are not generally available to private individuals.


By understanding your likely cash flow based on your unique goals, you can determine how much per month you will be able to safely spend in retirement without running an unacceptable risk of running out of money. Once you know this number, it’s time to experiment: Spend a year strictly living within that budget to see if it’s sustainable. If it’s not, you know you aren’t ready to retire yet, and you need to either save more, or adjust your expectations.


Stewart Willis is the founder and president of Asset Preservation Wealth & Tax, a financial planning firm in Phoenix, Arizona. Investment advisory services offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.


The commentary on this blog reflects the personal opinions, viewpoints and analyses of the author, Stewart Willis, providing such comments, and should not be regarded as a description of advisory services provided by Foundations Investment Advisors, LLC (“Foundations”), an SEC registered investment adviser or performance returns of any Foundations client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment, legal or tax advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Personal investment advice can only be rendered after the engagement of Foundations for services, execution of required documentation, including receipt of required disclosures. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Foundations manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Any statistical data or information obtained from or prepared by third party sources that Foundations deems reliable but in no way does Foundations guarantee the accuracy or completeness. Investments in securities involve the risk of loss. Any past performance is no guarantee of future results. Advisory services are only offered to clients or prospective clients where Foundations and its advisors are properly licensed or exempted. For more information, please go to and search by our firm name or by our CRD # 175083.

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