Can You Afford to Quit Before You Can Afford to Retire?

You’re in your mid-50s, you’ve worked hard, and you’re starting to see the finish line. There’s just one problem: you’re not sure if you can stand another three years at your current job.

Retiring tomorrow is what you want to do, but when you run the numbers, you’re not quite there yet.

So, what do you do?

Not being able to fully retire today doesn’t mean you have to keep doing exactly what you’re doing for three more years. Perhaps there is an alternative you haven’t thought about yet.

I frequently speak with people who are in this position, and I’ve seen people handle it a number of different ways. Some come to the conclusion they have enough saved that they can afford to go do something they enjoy, even if it means a pay cut. Some decide it’s not worth the financial tradeoff and stick it out. Some do something in between.

1. What is the actual gap?

Saying ‘I can’t retire for three more years’ makes that problem feel pretty big. Putting a dollar amount on it makes it something you can actually plan around. Maybe the gap isn’t money as much as it is access to retirement accounts or health insurance. Once you define the gap, you can then look for ways to bridge it.

2. Understand the Rule of 55

Someone who separates from their employer during or after the calendar year they turn 55 may be able to take distributions from that employer’s 401(k) without the normal 10% early withdrawal penalty. That can create options—but penalty-free doesn’t mean tax-free, and having access to it does not necessarily mean you can afford to spend it. Keep that in mind.

3. Consider whether you need to retire—or just quit this job.

Maybe the answer is a lower-paying job doing something you enjoy. This could allow you to either defer taking withdrawals from your retirement or take out a smaller amount that will not overburden your nest egg.

4. What does buying your freedom actually cost?

Run the numbers and see what retiring today would actually look like. How much income could your current assets reasonably provide? Maybe the gap isn’t as big as you thought, or maybe you have ways you can bridge that for a few years. Retiring early might mean spending a little less, working part-time, or accepting you’ll leave a little less someday. Those are tradeoffs, but that doesn’t automatically make them bad decisions.

5. Does retirement cost as much as you think?

How much does your commute cost you every day? What if you downsized your house and used the extra cash to supplement a couple of years of freedom? What other expenses or debts could be reduced or eliminated prior to quitting?

Retirement planning isn’t always about finding the earliest date you can stop working. Sometimes it’s about figuring out how much flexibility you’ve accumulated. Maybe you don’t have enough accumulated to retire today, but you might have enough to make a change.

I personally believe that flexibility is as much a currency as the dollar bill. It can be earned, traded, bought, and sold. Maybe that makes it an asset—I’m not sure. But I do know how important it is. How much have you accumulated, and when are you going to use it?