One of the most challenging decisions you’ll ever need to make is when is the best age to retire.
There are so many factors that go into the decision. You need to know how much money you need to retire, how much money you have saved, your health, lifestyle, family obligations, and more.
Once you’ve considered all those things, you can begin to wonder what’s the best time to retire.
With so many things to think of, you will be overwhelmed. What more if you plan or prepare for your retirement later?
This is why retirement planning needs to be implemented early to adjust and make necessary changes to reach the desired fixed income you want to enjoy when you go through your golden years.
Nowadays, if you talk to a financial advisor, most will say that 60% of your retirement income should come from your savings and investments, and the other 40% should come from Social Security.
With this information, you may still have many questions running through your head like:
- How do I decide when I should retire?
- What would my lifestyle be like if I retired now?
- When do I begin withdrawing Social Security benefits?
- Can I afford to wait?
Let’s take a look at each detail you must consider and its implications before deciding when to retire.
Factors To Consider
Below are the factors you need to consider.
This is one of the most critical factors when determining when it’s time to retire. It’s not just about being able to physically do your job but also about enjoying your life once you’re retired.
If you’re not feeling fine physically or mentally, retirement may be an option worth considering sooner rather than later.
If you’re in excellent health and enjoy working, then retirement should wait until at least age 65 so that Social Security benefits can begin accruing.
Health problems can lead to disability and reduced or eliminated social security benefits.
If you have health issues, a significant illness or injury, or have chronic conditions like diabetes or heart disease, now may not be the best time for retirement.
You may want to consider working part-time while still collecting full-time paychecks from Social Security before making drastic changes to your lifestyle.
If you’re young, you may want to work longer to have more time to enjoy your retirement. So if you’re in your early 20s, there’s a good chance that retirement isn’t on your radar yet.
But as you get older, it becomes more likely that you’ll have to consider whether or not retirement is in your future.
For example, if you’re 40 years old and still have another 40 years left before retirement, it may make sense to wait until 65.
On the other hand, if you’re 60 years old and only have ten years left until retirement, perhaps it makes more sense for you to retire sooner rather than later.
Your health care benefits
If your employer offers some form of health care coverage for retirees, this may not be an issue, especially if your employer’s health insurance plan will probably cover you until you reach age 65.
But once you reach that age, Medicare becomes your primary source of coverage unless you purchase an additional policy through the Affordable Care Act marketplace or another private insurance provider.
Suppose you don’t have another source of coverage beyond Medicare.
In that case, it might be sensible to retire before this happens. However, Medicare doesn’t always cover everything and can be expensive if you need supplemental coverage (prescription drugs).
So when you retire, your employer will no longer pay part of your health insurance premiums. If you don’t have a spouse covered by an employer plan, you may need to purchase individual health insurance coverage on the open market.
This could become very expensive, especially if you have pre-existing conditions or other health concerns.
In addition, if you retire before age 65 and become eligible for Medicare, you won’t be able to purchase private supplemental coverage for any pre-existing conditions that developed during your working years (unless you bought COBRA continuation coverage).
Private insurance companies also may refuse to cover medical expenses related to pre-existing conditions not covered by your employer’s health plan before age 65.
By contrast, if you wait until age 65 to retire, private supplemental coverage may be available at reasonable rates — even if this would be considered “pre-existing” under personal policies issued before age 65.
Your retirement plan
This may not be an issue if you’re already contributing to an employer-sponsored retirement plan, such as a 401(k).
But if you’re not, or if you’re contributing only a tiny amount, then you need to ensure that your retirement savings are sufficient for your lifestyle.
For example, if you want to retire at 70 and live off Social Security alone — which could be possible — then saving just $500 per month would be enough.
However, if you want to live off savings and investments alone, saving $1,000 per month will provide a much more relaxed standard of living in retirement.
If you have access to an employer-sponsored plan like a 401(k) or 403(b), it’s wise to contribute as much as possible because the tax benefits can add up quickly over the years.
Your family responsibilities
Whether or not you have children, your family responsibilities will play a role in your retirement plans.
If there are young children in the house, you may need to work longer before retiring because of the expense of child care and college tuition.
Or perhaps they’re older but live with you and require care—this can be both positive and negative.
On the one hand, there’s less pressure on them if they move out; on the other hand, they may need more help from you financially due to their lack of independent income.
Your financial resources
If you’re not financially ready for retirement, it might be best to delay it.
Enough money is essential to maintain your living standard without worrying about running out of funds.
If you’re unsure how much money you need, use a retirement calculator to estimate how much you will need in retirement based on your current expenses and income sources.
Retirement is all about taking advantage of the time you have left. You should be able to do whatever you want without restrictions or obligations.
This means that if you like spending time with your family and friends, work hard so that you can retire early and spend more time with them.
If you want to travel the world and see different places, put in the hours at work to save up enough money to fund your travels; whatever makes you happy should be at the forefront of your mind when deciding when to retire.
What retirement means to you
When thinking about when to retire, everyone has a different definition of what retirement means for them.
Some people look forward to spending more time with family and friends, while others relish the freedom of having a boss or co-workers.
Some enjoy travel and new experiences, while others prefer relaxing at home or pursuing hobbies and interests.
For some retirees, it’s all about golf and bridge; for others, it’s volunteering in their community or continuing their education.
You can plan and prepare for retirement but can’t predict the future. What if you get sick or disabled? What if there’s a recession or market crash? The best time to retire is when it’s right for you.
Many factors go into making this decision, and no one answer applies to everyone. The key is to consider all the possibilities, weigh the risks and opportunities, and then make an informed decision that works best for your situation.