It isn’t always entirely clear when we’re supposed to retire. The reality is that everyone’s situation is different. Some people have the means to retire early while others have to work their whole lives. To know exactly when you’ll be ready to retire, you’ll need to do some calculations. This will include looking at your salary, set expenses, savings, projected spending and more.
When Should You Retire?
Depending on who you ask about the proper retirement age, you could get different answers ranging from 62 to 70.
You can technically start receiving your Social Security benefits at age 62. However, you’ll receive only a fraction of what you could receive at your full retirement age.
If you want to receive 100% of the Social Security benefits you’re eligible for, you should start by figuring out your full retirement age. If you were born between 1943 and 1954, your full retirement age is 66. Anyone born from 1955 to 1959 has a retirement age of 66, plus a certain number of months. If your birth year is 1960 or later, your full retirement age is 67.
Waiting until 70 to claim your Social Security benefits allows you to receive the full amount of your benefits in addition to delayed retirement credits, equal to 132% of your planned Social Security benefits in total.
The choice ultimately depends on whether or not you need that cash more immediately as you cut back on your working life or whether you can afford to put off receiving those benefits for a few years in order to get a more robust payout each month. Other considerations include your life expectancy — typically the delay makes sense if you expect to live into your 80s — and your spouse’s financial security should you pass away first.
Do You Have Enough Money to Retire?
When it comes to saving for retirement, the rule of thumb has typically been to save between 10% and 20% of your salary each year. That should allow you to live comfortably in retirement. Another general rule states that you’ll need about 80% of your pre-retirement income to maintain your lifestyle, more or less, in retirement. Of course, if you’re planning to live either more lavishly or more minimalistically, you can save accordingly.
Perhaps it will help to take stock of your savings through a retirement calculator now. Also estimate how much you think you’ll need to live comfortably in retirement. That will help you check whether you’re on track and whether you perhaps need to cut down some potential expenses in retirement. A financial advisor can really come in handy here to offer professional guidance. He or she can take a comprehensive look at your current financial situation and create a financial plan to help you reach retirement. Our financial advisor matching tool can connect you with advisors qualified to help you with your finances.
Can I Retire Early?
With the retirement age getting pushed further back, retiring early may be too difficult for most of us. But if you’re already surpassing your savings goals, then perhaps an early retirement could work for you. You’ll want to make sure any extra years in retirement will be covered by your savings. This is especially crucial if you retire before you can start taking Social Security payments.
Generally, you shouldn’t retire with debts still hanging over your head. This includes your mortgage. You won’t want to use your retirement savings to pay down debts continually, especially without a steady salary.
You’ll also want to have a healthcare plan in place if you want to retire early. You’ll become eligible for Medicare at age 65. Before that, you’ll have to rely on private insurance or your spouse’s insurance. Your former employer may even be able to extend some coverage to you in retirement. Without your workplace insurance, you could end up in some real trouble should you need medical care.
When you can retire and when you should retire are often two different things. You can retire with limited Social Security benefits at 62, but you won’t yet have Medicare coverage. At 65, you’ll have Medicare, but still may not have access to your full Social Security benefits, depending on when you were born. And waiting until 70 to take your Social Securities can deliver greater payouts and make sense depending on your particular situation. There are a lot of factors you have to take into account before deciding when to leave the workforce to ensure you have a safe and comfortable retirement.
Tips on Saving for Retirement
- If you know now when you’d like to retire, maybe it’s time to amp up the retirement savings. In an ideal world, you’re already contributing to your 401(k) if one is available to you, but are you using your employer match program? Not all employers offer 401(k) matching, but if yours does, you should definitely take advantage of it. Typically without much extra effort from you, you can benefit from free money hitting your retirement savings account each month.
- Again, if all this calculating and planning is too daunting for you, you don’t have to go it alone. Think about getting a financial advisor. When looking for the right one, be sure to ask each advisor questions that will help you get a better feel of what he or she can offer. That way, you won’t end up with an advisor who specializes more in debt recovery than retirement planning.
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