When Should You Retire?

Reginald A.T. Armstrong • Retirement Planning


Whether your retirement is far in the future or you are nearing retirement age, you may be asking yourself, “When should I retire?” The truth is, even though there is an age at which you qualify for retirement benefits according to the government, the answer is not always straightforward. So if you’re wondering when you should retire, the only accurate answer is, it depends.

The best time to retire is less about age and more about how your financial resources and your vision of what retirement means to you. When deciding when to retire, first you need to determine what kind of lifestyle you want to live and what you can realistically afford. 

What is the Social Security Full Retirement Age?

Even if Social Security benefits will only account for part of your retirement income, it is important to take the timing of your eligibility into consideration.

Your Social Security full retirement age ranges from 65 to 67 years old and it depends on when you were born. 

People born between 1943 and 1954 reach full retirement age at 66, those born after 1960 reach full retirement age at 67, and those who fall between hit full retirement age at 66 years and some months, according to a table you can find on the Social Security Administration website. 

When Should You Claim Social Security Benefits?

Despite the fact that everyone has a specific full retirement age, anyone who qualifies for Social Security retirement benefits can choose to claim their benefits as early as age 62, and as late as you want, with 70 being the longest it might make sense to wait.

If you choose to claim retirement benefits before full retirement age, your monthly benefits will be less than if you wait until full retirement age — permanently, throughout your entire retirement. So retiring early can reduce your long-term Social Security income by 6% to more than 20% per year, depending on how early you retire.

If you continue to work beyond your retirement eligibility age, a portion of your salary may be deducted from your monthly Social Security benefits until you reach full retirement age. But choosing to wait until after you’ve reached full retirement age to collect Social Security means your benefits will be higher — permanently, throughout your entire retirement. So retiring later increases your overall income by 8% for each year beyond your full retirement year until age 70.

In many cases, it’s best to file at full retirement age or later whenever possible.

Can You Afford to Retire?

Although it is important to understand your Social Security retirement benefits, you’ll need to keep in mind that just because you have reached your full retirement age, doesn’t mean you should necessarily retire.

If you have saved an adequate nest egg to live the retirement lifestyle you desire, you can retire whenever you’re ready. If your savings are lacking, but you would be satisfied with downsizing your home, cutting back on expenses, and adjusting your lifestyle, retiring might be an option for you too.

But if you can’t afford the lifestyle or standard of living you want to maintain on a combination of your Social Security benefits and savings, you might prefer to put off your retirement and work longer. 

Some people choose to retire while others would rather work longer to support a higher standard of living. If you are healthy and able, there is no right or wrong answer — it’s a matter of preference. 

The question you have to ask yourself is not whether you are eligible to retire but whether you have the financial resources to have the kind of retirement you want. Only you can answer that question for yourself.

Ideally, we recommend working with a financial advisor to determine a retirement goal that makes sense for you. 

Start with estimating your total annual household budget, including big expenses that may arise periodically. Calculate the total of all your potential sources of retirement income, including Social Security benefits, annuities, and income from other investments. Then determine a realistic estimate of how much you plan to withdraw from your savings and investments over time. 

Once your finances align with what you consider a comfortable retirement, that is when you can afford to retire.

What Meaning Does Retirement Hold For You?

The question of whether or not you should retire is more than a financial one.

Some people can’t wait to quit their job so they can sit on the beach (or their back patio, depending on their finances) sipping a cocktail at 3 p.m. Maybe you’re looking forward to writing the great American novel, hiking the Appalachian trail, or spending quality time with your grandkids. 

But some people are passionate about their career and they’re not ready to give it up, and some simply can’t imagine not getting up and showing up somewhere every day. Perhaps you will miss working. If going to work fills you with a sense of purpose or makes you feel useful, there’s nothing wrong with sticking around the workplace further into your golden years. 

You’ll want to think about how you plan to spend your days when you retire. Will you get bored, sitting around watching television? Are your friends still working? Is your family nearby? How do you plan to stay connected and be involved? You might decide on a semi-retirement, working part-time, or diving into volunteerism. 

Most importantly, remember that retirement is a major life change and it’s not a decision to make lightly. Even if you are looking forward to it, expect an adjustment period and plan for the unexpected.

The more carefully you think about and plan for retirement, the more likely you’ll be able to make the choice to retire at the right time.

 

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