Should You Work One More Year?

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I’m “retired,” but I took this past summer off anyway. I wrote less on the blog. I postponed some personal projects. And, I worked on my bucket list — doing the things I couldn’t do while working full time, while raising a son, while living back east. This was the first summer since my 20’s that I could spend entirely in the big mountains of the west. If I was to have any regrets when this year was over, it wouldn’t be because I hadn’t been outdoors hiking, biking, and climbing enough….

The season began on a frosty night in May, camped beside an alpine lake in the Sangre de Cristo mountains. And it ended in early October, gliding through neon gold aspens in Crested Butte. In between, I spent a dozen nights out on the trail, summited several 12,000 ft. peaks, led a bunch of rock climbs, and logged miles of epic riding on my mountain bike.

None of this means much, by worldly standards. But it meant a lot to me. Doing these things enriched my life, and left me with fewer regrets, should it all end tomorrow. And it wouldn’t have been possible, if I were still stuck at a desk in my corporate job….

How many more seasons like this will I get? In between the fun, there were persistent reminders that I’m getting older. I expect to stay this active for another five years. Maybe I’ll get ten. Beyond that could be wishful thinking….

In Retirement Range?

And, how about you? How much longer do you have to follow your dreams? Should you work another year, or should you pull the plug on a full-time career and take another path, before it’s too late?

I’m grateful to be able to chase my remaining dreams here in middle age. I could have worked longer, accumulating more money and more security. But I was in range to retire, and I chose a different path.

This is a difficult, very personal decision. Perhaps you are one of the “lucky” ones, where the financial realities make the choice clear: Much of the retirement research shows that if you can live on less than about 3% annually of your life’s savings, your financial independence is assured. On the other hand, if you need more than about 5% of your savings annually, then you should probably keep working, or else risk running out of money in retirement.

But that leaves a lot of people within the right range, but without a definite answer. If you can live on 3-5% of your savings, you probably have enough to retire, if things go reasonably well. But nothing is guaranteed.

So, what should you do? Keep trading your life’s energy for more security — work another year, or make the leap to something else?

Simple Calculation

Here is one straightforward approach for clarifying the decision. Admittedly, it ignores some variables, so, like most attempts at predicting the future, it’s a gross simplification. But it just might give you some insight.

Start by calculating your net worth — the sum of all your assets. If you need a refresher on how to go about that, check out my recent article in Money.

Next, determine your annual living expenses in retirement. For what it’s worth, the median value for expenses in my Reader Survey is about $5,000/month or $60,000 annually. For ideas on adjusting that number to your lifestyle, check out my post on the cost of living in retirement.

Now, do a quick calculation: divide your net worth by your annual expenses. This tells you how many years your money will last, not taking into account investment earnings. So this is probably a very conservative estimate, though nobody can be certain.

(Allan Roth calls this reframing your wealth as time not money. And note that spending less has the greatest impact on the equation. That’s because earning more only lasts while you’re working, and is diminished by taxes, but spending less lasts the rest of your life!)

Finally, take a stab at predicting your life expectancy. I did this recently, and it was an eye opener. You can use either or both of these web sites: Living to 100 or Blue Zones. Each will take about 10 minutes of your time, with questions about your lifestyle, family, and medical history. They’ll then try to predict your longevity based on the latest research.

So, is your calculation, the number of years your money will last, greater or less than your life expectancy? Do you have more years in savings than you have life to live? If so, then you are no longer working strictly for financial reasons. In which case, why are you still working?

Opportunity Cost

The calculation we just did gives you some idea of the odds of having enough money to care for yourself for the rest of your life. Presumably, if you like the odds, you can “retire” now. But we know that reality is more subtle than that.

There are trade-offs we all must navigate: To succeed in a profession takes focus and dedication. As a result, you may miss out on some of the other things that life has to offer. But, eventually, that profession can produce significant income, which could possibly buy you a different set of opportunities.

In microeconomics, opportunity cost is the value of the best alternative you must forgo in order to exercise a choice. In theory, you will only make a choice if you think that the value you gain by doing so, exceeds the opportunity cost — the value you would get by doing something else with your time and money.

Should you work another year? Thinking about opportunity cost gets you evaluating your alternatives as each year passes, instead of trying to predict cash flows into an uncertain future.

The real question, for anybody who thinks about this deeply, is “To be happiest, should I keep doing what I’m doing, or make a change?”

At some point in their careers, most people are facing these choices/equations:

Keep Working: Get X1 dollars + Y1 free time ==> Z1 happiness


Retire/Do Something Else: Get X2 dollars + Y2 free time ==> Z2 happiness

Presumably, the more you work, the more money (X1 > X2) and less time (Y1 < Y2) you have. And presumably more money and more time would both increase happiness, though not at the same rate. The goal is to optimize happiness (Z2 > Z1).

The trick in solving these equations would seem to be in converting between dollars and time. But, life being what it is, they don’t convert at a constant rate. In classic microeconomics theory, most goods are considered to have decreasing marginal utility — each additional unit you consume brings you less additional happiness than the previous unit.

So these are “marginal” dollars you’re earning. If you’ve got more money than time, as many do late in their careers, how much do you care about another dollar? Assuming you know what to do with it, the time is much more valuable. The question is, how much more valuable?

I’m not sure there is an easy mathematical answer, but there was definitely one in my heart when the time came for me to make the retirement decision over three years ago….

Looking in the Mirror

There is a school of thought that people are rational robots who should choose the activity that maximizes their income — that they shouldn’t work for less than they’re “worth.” But that ignores quality of life factors.

Most of us have changing formulas for happiness over time. I loved my work in the early years, was fascinated by computers and programming, and immersed myself in the field, day and night. But, eventually, I reached the peak of what I could accomplish, and the passion faded. Other interests came to the foreground.

Twice I made major career decisions that involved turning down a management/executive track, and probable ensuing promotions and raises. These weren’t the financially optimal decisions, but there is no doubt that they improved my happiness and my quality of life. And things turned out OK on the financial front, anyway!

The necessary reality that most of us live in approaching retirement is that we are closer to the end of life than the beginning. None of us knows for certain just how much longer we have left. I try to ask myself the question frequently: “If it all ends soon, am I going to be satisfied with how I’ve been spending my time?”

And, beyond some simple financial calculations, I think that is the best way to know whether you should work one more year….


  1. Bob Macfarlane says

    Great write up.

    The opening four paragraphs were a fantastic articulation of what I have felt. I left a very good job at age 48 (~5 months ago) and retired because I felt a strong need to be with my family more and to spend more time outdoors. I wanted to do things while I am still physically capable of backcountry snowboarding, mountain biking, hiking etc. Choosing to retire actually takes some courage and I got a surprising amount of skepticism from my peers when I left.

    One change I have noticed is that I am far more risk averse with my portfolio now than I was when I was still working. I wonder what others have noticed with post retirement risk tolerance. I am looking to get some more income properties and diversify further away from my approximately 50% equity mix.

    Great site and resources.


    • Thanks Bob. I hear you on the courage, and believe you will not regret your decision. Those are good reasons in my book. And, yes, I’m cautious with my portfolio these days too. Holding a lot of cash, but still enough equities to catch some growth. If you have the skills for income properties, they make plenty of sense. Thanks again.

    • Frank Brown says

      yes I’ve read that this is common after retirement – once the income from employment stops, one can suddenly tend to paranoia about spending – OMG once spent it’s gone forever !

      a good awareness of cashflow (I’ve been doing with monster spreadsheets for years) can help avoid the financial shocks which accrue to those who ask questions like ‘I’m ready to retire – my life savings are $300,000 – how can I use this to generate $60,000 a year for life please ?’

  2. Great post, as usual Darrow! I always look forward to your articles, and have printed and shared your blueprints with others. Retirement shouldn’t be about retreating from something as much as it’s advancing toward other interests and opportunities. Watching tv in your bathrobe might be good for a few days but it’s not much of a future and no kind of a living. A key part of preparing to retire is envisioning what we want to do, see, experience, and yes- accomplish. Planning, preparing and antipation can be almost as enjoyable as the event itself.

  3. I liked this post a lot. Lately I’ve been thinking a lot about what my portfolio should look like when I do retire. I’m about a year or two away from “retirement” from full time work and currently have about 50% of assets in equity index funds, 25% in private FOF’s vehicle and 25% in fixed income/cash. No debt either. Probably will move towards 60% fixed / 40% equity and consider buying an annuity. Any thoughts?

    • Hi Andrew, thanks and congratulations. I try not to advise others, but I do talk about my own asset allocation in My Investment Portfolio. An allocation in the neighborhood of 50/50 has worked for me for a long time. Vanguard Wellesley Income (60% bonds / 40% stocks) is my largest personal holding. There is new research on rising equity glide paths arguing for reducing the allocation to stocks around the retirement date, then increasing again over time. It’s a topic of some debate, but food for thought.

  4. Nice piece Darrow. Money is about financial independence and having choices later in life. It doesn’t buy happiness but gives more choices to pursue it.

  5. Your post was very timely, as I retired on Friday, age 52 and forsaking a much larger pension had I remained until 60. I received mixed reactions! I cannot agree with you more that time and spending it how you really want, is so much more important than any dollars and cents. I am asking myself all the time now…if I had but a short time to live, what would I be doing?

  6. [In our early 50’s now], a high school classmate recently commented to me that she is now applying the following question to just about everything; “if not now, when?”

  7. Darrow,

    Interesting post. This is a question we’ve been thinking a lot about recently. I’m currently 38 and we have about 20X our current annual expenses in investments (+debt free, + own home and cars outright not included as an investment, + 6 mos expenses in cash, +anticipate some unknown amount of inheritance from parents at some point in life.)

    My wild card is that we have a 2 y/o daughter. Do you have any insights on costs of raising a child as they grow, especially during the teen years. We do have a plan for college (dedicated savings in this area separate from assets listed above + hobby job that we’ll continue allowing us to earn small amounts of money that we’ll continue to add).

    Part of me feels that I’m ready to do it now while I have the health to do everything I want (I’m also a climber, skier, etc) and have a young daughter who actually is at an age where she wants us around. Part of me feels like this is crazy because no one else does it and I just don’t know how to factor in the kid costs.

    Great blog, glad to see you’re back writing.


    • Hi Chris, congrats on your progress — you have interesting choices ahead. I was in a similar situation in 2008, on the cusp of financial independence. The bottom fell out of the market, and we still didn’t have a fix on my son’s college possibilities, so I waited a few more years. Here are some of my articles related to kid costs:

      Having Kids vs. Retiring Earlier

      Paying for College: The Last Retirement Hurdle?

      • Thanks Darrow. Those were both interesting reads.

        I am actually not that concerned (even if that makes me a bit delusional 🙂 about college costs because 1.) we started saving so early and are confident in our plan, 2.) we will expect her to contribute in some fashion b/c we think it is beneficial for a kid to have some skin in the game and 3.) I simply can’t imagine college costs continuing to inflate at their current rate b/c it will be unsustainable and simply not make any sense to pursue a formal college education if they do.

        The point that I found most interesting from those posts is that the average middle class family spends only about half as much as the average upper class family. This demonstrates how much variability there is and how much choice you have in how to spend your money. I guess I would like to be able to have some way to predict where we’ll fall in that spectrum. I want to make sure we don’t raise our daughter feeling deprived or that we are cheap because we spend much less than average. At the same we want her to know that the average spending in our country is often simply insane and completely wasteful in our opinion. I’m sure we’ll figure it out as we go, but I see this being an area that could be challenging to navigate with a child/teen at times, will require us to pick our battles and at times spend money that we would not spend on our own.

        • I agree with you both philosophically and on a lot of the details. You’re on the right track, in my opinion. Yes, there will be some family drama down the road. But if you stick to your principles, your daughter will someday be a financially independent adult who thanks you regularly for the financial discipline you instilled and the freedom that it gives her relative to her peers. I’ve “been there, done that” and can tell you it works.

  8. There are some of us for whom our professional work is what we do for fun as well as for money. I’d be pretty lost if I wasn’t doing my job. I’ve never used up all my vacation time in any year. My biggest regret is that my grandkids live far away so that I only see them about twice a year. I’m burnt out on travel as I have traveled a lot as part of my work. I’ve been pretty much everywhere I want to go. My work schedule is sufficiently flexible that I can run and bike as much as I want. I plan to work until my health fails or my company pushes me out the door. Maybe I shouldn’t be on this site? ;o)

    • TW – Actually, I was of the same mindset until recently. If you spend time on sites like this, you never know what possibilities will open up! You may find there is some interest you have (or used to have) that you could pursue if you were working less. If working is enjoyable for you, you can still benefit by learning ways to improve your financial security. No job is guaranteed these days!

      I have several years to go before I am financially secure enough to reduce my work. I look forward to having the choice, but even now, I’m not sure if I could just completely walk away from my professional life. But it will be nice to not have to push myself so much!

      • Agreed. Those who still enjoy their profession are the most fortunate of all. I’d never want to put down that choice. As long as it’s giving you the flexibility you want, be happy and enjoy!

  9. You can always work more time and have more money. So time will buy you money but no matter how much money you have it will not buy you time. I will retire next year God be Willing. I will have worked enough to earn the standard of living I want in retirement so I can do the things I want to do. But I will not work one more hour of time than that.

  10. Fred Westenfeld says

    Thank you Darrow for another great read! I can’t wait for the next one! Time is the irreplaceable variable. Thanks for helping me to refocus on that! Regards, Fred

  11. I gave up full time work 1 year ago at 46 and do a fun job now that is part time and my boss works well with my many requests off. I bought a 2nd rental property cash with the stock market gains of the 2011-2012. These rentals pay all my expenses with enough left to have a surplus. My portfolio still 70% equity (I’m currently looking at reducing that to maybe 60%) is not needed at this time. I do want to start to take some funds out because I have to get in the mind set that I can’t take the money with me when I die. I just don’t want to run out of money before I would run out of life. Currently have 37 x’s my full time pay invested. So I plan on taking 4% out each year on what the account balance is at the beginning of that year. Any thoughts on the 4% of balance and not running out of money since my retirement is longer (hopefully) than the traditional one.

    • Hi Matt, you sound very secure, congrats! Taking an annual percentage is one of the safer withdrawal approaches: technically you’ll never run out, though your income could get very low. The classic “4% rule” is a static amount of 4% of the portfolio at the start, adjusted annually for inflation. The original studies were for 30-year retirements. In general, longer retirements call for lower withdrawal rates, though the differences aren’t always large. There is no substitute, in my opinion, for annual monitoring and adjustment based on how things go in the market and your life.

  12. Tex Wonder says

    In my opinion this is one of your very best posts yet! Prescriptive in a broad sense, but avoiding cookie cutter assumptions and excessively detailed equations (principles, rather than rules). That said, I do have one specific question I hope you can help me to ponder. If you use a life calculator (risk factors for a single person), but expect to spend down jointly held assets with a spouse, how do you factor in the variable life expectancy for male versus female, family history, etc? Take the average, take the largest number (assuming two can live nearly as cheaply as one)…? That calculated 3-5% spending rate range seems likely to vary within a relationship based simply on life expectancy.

    • Hi Tex and thanks. That’s a good question, with some different dimensions. What I can say easily, I think, is that for looking at the longevity of a portfolio supporting a couple, you’d need to estimate both life expectancies separately and work with the longer of the two. For withdrawal rates, it’s mostly about expenses, regardless of how many people are being supported. If “two can live cheaper than one,” yet those two incomes helped build the nest egg together, then that gives you an edge in withdrawal rate (a lower one) versus a single person. Hope that helps, and thanks again for the kind comment.

  13. I’m 56 and struggling with this very question.

    It all boils down to 3 questions:1. Do you have enough? 2. Have you had enough? 3. Do you have enough to do? 🙂

    For 30 years I’ve focused on accumulation – earnings and investing. For the last 10 years I’ve started looking at distribution. How will the pretax monies, post tax monies, and Social Security income be woven into the most efficient method of distribution?

    I’ve looked at several free, online planners and they are simply, too simple for me to place any faith in.

    I finally ran across a piece of retirement planning software that I trust, at least more than any other advice I’ve been given. It’s called Silver by Moneytree Software. It has a free 30 day trial and the free trial comes with a sample report you can print out to see what type of report you’d get by entering your personal data. They will sell you a personal copy for half price if you call and ask them to do so.

    None of the people I’ve talked with seem to do any type of distribution planning which shocks and amazes me! They just seem to be winging it.

    I think I have enough, I know I’ve had enough, and I hope I have enought to do. If not, I have the rest of my life to figure it out.

    Any thought on other software you like better?

    I also like Henry Hebler’s book and website for retirement advice.

    • Hi Gars, thanks for those tips. I put Silver on my list to explore further. My current favorite planning software is on my Resources page. But there are more and more tools out there, and I haven’t seen them all. Love your 3 questions!

  14. MikeWillRetire says

    My plan is to retire at age 56 or so (3.5 years from now). Since my retirement includes a pension and social security, I figure I need two buckets of assets to fund my retirement. One bucket has to get me from age 62 onward. After subtracting Social Security and my pension, that bucket already has 25 times my retirement expenses. Because of the pension and social security at age 62, this bucket doesn’t have to have alot of money. The second bucket has to get me from age 56 to 62. In that bucket I am trying to save 6 times my expenses since it has to last 6 years without a pension. This bucket will have to have twice as much money as the age 62 bucket, and the thought of spending down that much in 6 years is a bit worrisome. By the way, thanks for the free e-book, it was very helpful in my planning.

  15. Darrow: In your opinion if a person retires at 62 years old and has enough money in pensions and Social Security to meet MOST of their retirement needs. Would you agree that they could be more heavily invested in equities? SAY 80/20.

    • Mark, that would often be the advice, though 80% equities would personally give me pause in retirement. And there are other ways of looking at the situation. For one, if most of your income is guaranteed through Social Security and pensions, then you may not need to take on the risk of additional exposure to equities, if you don’t want. Also, there is new glide path research, arguing that people should reduce their exposure to equities around their retirement date. Lastly, you say the guaranteed income meets MOST of the needs but, if the needs aren’t FULLY covered, and you need to rely on your portfolio even minimally, in the short term, then you would want to be sure to hold enough in bonds/cash to cover that.

  16. That sounds like an amazing way to spend a summer.

    I’ve been thinking more and more about this topic as the fall season has been in full swing. I love fall, and this fall I’ve been working 60 hour weeks instead of backpacking. My job is great, but it is holding me back from doing what I love. Can’t wait until the job is optional. Maybe I’ll keep it and just negotiate a better work life balance. But I want the BATNA in my favor, and Financial Independence gives me that winning hand 🙂

  17. Wonderful article.. At 48 starting to ask myself this question often. Pursuit of happiness is becoming increasing important.