In addition, account for the timing of your retirement and how it will affect your Social Security benefits. For those born before 1937, the full retirement age is 65. For those born after 1960, the full retirement age is 67. If you retire before full retirement age, your monthly benefits will be permanently less than your full retirement benefit—since you will be receiving them for a longer period. Also, if you continue to work, part of your salary may be deducted from your monthly benefits until you reach full retirement age. Social Security wants you to remember that you’re not being penalized—your benefits are spread out over a longer period. Not all experts believe that is true. However, in most cases (not all), it’s best to file at full retirement age if possible.
Can You Afford to Retire?
Just because you’ve reached retirement age and might be eligible for a pension or for social security doesn’t mean you should retire. Maintaining a comfortable lifestyle means different things to different people. For example, if retiring today could be accomplished, but you would need to downsize your home, car, and overall lifestyle, it may not be ideal for you. For others, it may be perfect. Some people retire, while others prefer to work longer if it means maintaining a higher standard of living in retirement. So, the question is not can you retire, but how much do you need to save to have the kind of retirement you want. It would be nice if there were a simple answer that would tell you how much savings you need to retire. However, everyone is different, and the right amount for you may be drastically different for someone else. Work through your numbers with the help of a financial planner to calculate the amount that you need to afford your desired retirement.
Steps to Help You Decide
In addition, there are several steps to determine if you can afford to retire: If you go through your financial projections and determine you can’t afford retirement, it’s probably too soon. Instead, explore ways to save more money, or find work you enjoy, so it doesn’t feel like work. Revamping your career may allow you to work longer and accumulate the funds you’ll need. If your finances are lined up to support a comfortable retirement, your next item should be to define what retirement means to you.
What Does Retirement Mean to You?
For some, retirement means simply leaving their current job. These people are fine working, but they want a change, and making a change may come with a pay cut. For others, retirement means a complete exit from the workforce. If you’re married or have others who are financially dependent on you, they should be part of the decision. If you’re single, the answer is likely much simpler. Some career-oriented people are not suited for retirement. They are used to being “the go-to person” and find they get bored in retirement. If this sounds like you, the answer as to when you should retire might be “never.” Before you retire, give some serious thought to what activities inspire and motivate you. Start a list of hobbies that you want to pursue or organizations to which you want to contribute your time. From a mental and physical health perspective, stay active. Your body isn’t made to remain still all the time. Part of your retirement planning should include strategies for staying active and mentally challenged. As an alternative to traditional retirement, look for ways you can try out retirement. Perhaps your current situation offers part-time work or a sabbatical. Maybe you can take a long leave of absence. Retirement is a major life change just like moving, marriage, or a job change, so plan on going through an adjustment period. The more time you spend thinking about and planning for retirement, the more likely you’ll retire at the right time.
