We decided to climb Pikes Peak, and after we parked and made our way to the trailhead with our friends, my wife ominously blurted “there’s no turning back now.”
She was wrong.
Sixty minutes later, I was on my way back down the mountain by myself. Altitude doesn’t agree with me. I was forced to make a decision I didn’t want to make, but I’m really glad I did.
One of the most difficult and courageous decisions a person can make is to stop and turn back. This is also true for retirement.
While achieving a particular age may activate an income stream, it certainly doesn’t indicate you’ve ever reached the point of never turning back. Retirement is a giant math equation, and if the numbers don’t work, they don’t work. Hoping you catch a break here or there, is generally a really bad idea. Just because you stopped working and called it retirement, doesn’t mean you should have retired. And sometimes the only fix involves going back to work.
Retiring from retirement, and reentering the workforce is not a popular solution. But as you’ve grown to understand over the years, what’s right isn’t always popular. And beyond its lack of popularity, reentering the workforce is easier said than done. Again — popularity and difficulty should not impact your decision to solve the most serious financial problem you’ve ever faced.
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There are a few telltale signs your retirement isn’t working, and you’d be better served to turn around and reset the math.
If you’re depleting your assets at a pace of 10% or more annually, you could be in big trouble.
When you retire, your assets are egg-laying chickens and the eggs are your income. If there aren’t enough chickens to produce the desired amount of eggs, then in order to eat, you’re gonna need to start plucking a chicken. Which then means you’ll have fewer chickens to produce the number of eggs they were already struggling to produce. A problem like this gets exponentially worse as each day passes. It’s also a sign your retirement income strategy isn’t working.
For instance, if you retired with $350,000 in retirement assets, and you withdrew $35,000 in the last 12 months from those assets, feathers are flying. Either you need to drastically change your spending habits, or you need to reinforce your income sources. If you find yourself with significantly fewer chickens than you retired with, reentering the workforce can be a brilliant chicken preservation technique.
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If you’re going into debt
On the surface, it’s not bad if your net worth is decreasing during retirement, but if the decrease comes from an increase in debt, you’re in trouble. By the time you retire, you should have put your financial past permanently behind you. Debt is your financial past, and having debt forces a person to throw their current income toward past realities. If you’re creating new debt in retirement, it will force your future income to solve old problems. This is an unsustainable scenario.
Not only should you enter retirement without credit card debt or student loans, but you must avoid acquiring said debts throughout your retirement years. Whereas a working person can usually mitigate a debt-ridden existence, a retired person cannot.
Change in family structure
When you retired, you likely made your decision based on a snapshot of your life. If your picture has changed, specifically in the event of death or divorce, reentering the workforce may be necessary. This is especially true if you struggled to retire with two social security retirement incomes, and one of those monthly payments has since disappeared. Ideally, a successful retirement income plan accounts for death, disability and divorce, but sometimes – many times actually – it’s hard enough to put together a retirement strategy when everything goes your way.
When your family structure changes and it decreases your household income, pause to evaluate its true impact on your financial viability both now and in the future. Time may help with the grieving process and heal wounds, but time does not heal financial wounds. Sit down with your financial adviser and critically evaluate your new reality.
Peter Dunn is an author, speaker and radio host, and he has a free podcast: “Million Dollar Plan.” Have a question for Pete the Planner? Email him at AskPete@petetheplanner.com. The views and opinions expressed in this column are the author’s and do not necessarily reflect those of USA TODAY.