If you ask people when they plan to retire, they might respond that they plan to work until they get carried out in a box. Another person might plan on retiring the day he hits Social Security’s early retirement date. However, many people have not made a plan and have no idea if or when they will get to quit working.
Financial experts advise to save millions of dollars before you retire so you do not run out of money in your old age. They also suggest that you have no debt, including a mortgage. Therefore, it is not surprising that people get discouraged about ever getting to retire.
Here are 3 tips for deciding when to retire, without imposing challenging goals that most people cannot reach.
- Maximize Social Security, but Do Not Count on It
Although you can collect Social Security before your “full retirement age” if you qualify, your monthly Social Security retirement check will be much less than if you wait until you reach full retirement age or later to start collecting your hard-earned benefits. There is a massive difference between the amount of Social Security you will receive at age 62, 65, 67, and 70.
A person who would get $2,102 a month at age 62 will get $3,721 every month if she waits until age 70 to start collecting Social Security. The eight extra years of benefits checks have to count for something, but if she lives into her early 80s after retiring at age 70, her higher monthly checks will catch up for those payments. She will reach her “break-even” point and every month after that she is ahead in the game, with more than $1,600 extra in her monthly check over someone who took early retirement.
Keep in mind that, even with maximizing the amount of Social Security you can collect, you should not count on your Social Security check for 100 percent of your living expenses in retirement. Anything can happen by the time you retire and in the years after you quit working.
- Think About Longevity – Your Health and Your Family’s Track Record
If you have a health condition that is likely to take some years off of your life, taking early retirement might make financial sense for you. On the other hand, if a good number of people in your family lived into triple digits, your best bet might be to work until you are 70.
Bear in mind that retiring early might leave you without health insurance until age 65. If your spouse depends on you for health insurance, realize that he or she will not be eligible for Medicare until age 65, regardless of how old you are.
- Consider the Psychological Issues of Retirement
While financial issues are essential to deciding when to retire, they are not the only factors you should consider. Some people are miserable after they stop working. If you love your job, you might feel adrift after you retire.
This possibility does not mean you have to stay at your job for the rest of your life. Many people find a sense of purpose by starting a new career or business or volunteering locally or through organizations, like the Peace Corps, after they quit their “day job.”
You should evaluate your finances, health, and happiness, when making the decision about when to retire. Talking with a local elder law attorney can help you prepare and plan for your golden years.
Psychology Today. “At What Age Should You Retire?” (accessed October 6, 2018) https://www.psychologytoday.com/us/blog/cutting-edge-leadership/201104/what-age-should-you-retire
CNBC. “Social Security ‘break-even’ calculations can be misleading.” (accessed October 6, 2018) https://www.cnbc.com/2018/08/13/those-social-security-break-even-calculations-can-be-misleading.html