Editor's Note: This story originally appeared on NewRetirement.
When can I retire? It’s a question you probably ask weekly or monthly, if not daily.
The reality is that the answer to the question “when can I retire” is highly personal.
And it is not always all about how much money you have. In fact, money doesn’t always have a whole lot to do with retirement decisions. Lifestyle factors often have more influence.
Here are many of the questions you should ask yourself when trying to figure out when to retire.
1. Do you like work?
You might be surprised by who is working the longest. Recent research shows that finances aren’t the whole story when it comes to figuring out when to retire.
Guess what: The folks who are more likely to be working longest are those with the highest incomes, greatest wealth, and most education, according to a study from the Center for Retirement Research at Boston College (CRRBC).
So, what gives? Seniority and success at work may offer the kind of rewards that make work fulfilling and enjoyable.
2. When will you start Social Security?
When you start Social Security is a totally different question than when you stop working. But, you might be able to stop earlier if you wait to start your benefits.
Your total lifetime Social Security payments will likely be greater if you delay the start of benefits until age 70 — whether you are working or not.
Use the Social Security Explorer, part of the NewRetirement Planner, to figure out the best way to maximize your benefits.
The NewRetirement Planner is a do it yourself financial planning platform. Using it is like getting a world class workout plan, personalized coaching, and the results you want for your money.
3. What are your income needs?
Many people think that they can retire when they have saved enough money. However, most personal finance experts believe you should be asking a different question.
The real retirement question is: How much income do you need in retirement? And, in order to know how much income you need, you must first project your expenses.
How much do you need to spend? How much do you want to spend? And how will that change over time?
Use the NewRetirement Planner to create a detailed future budget.
4. How will you fund your income needs?
Retirement income planning is another critical part of a secure retirement. According to at least one Nobel Prize winner, you will want to be able to:
- Guarantee adequate income to cover your mandatory expenses
- Create flexible income streams for maintaining the lifestyle you would like to live
- Plan for being able to afford items on your “nice to have” list
The NewRetirement Planner enables you to plot Social Security, withdrawals from savings, passive income streams, and pensions and vary these sources over time to see how your income can cover expenses.
5. How long will you live?
Americans are living longer than ever before. A longer life means that you need to be able to pay for more years in retirement.
According to the latest data from the Proceedings of the National Academy of Sciences (PNAS), the life expectancy of the average 65-year-old is 19.4 more years. So, you will want to plan to fund your life until you are at least 84.5. However, women (in general) live longer and 84.5 is only an average — you are fairly likely to live longer, much longer even.
What’s important aren’t averages. You need to assess how long you (and your spouse) are likely to live. Try a good longevity calculator to get a more personalized number.
And then, use your personalized projected longevity as part of your retirement planning. The NewRetirement Planner allows you to set your own longevity. You can try different scenarios to see if you will run out of money (or not) at different ages.
6. What is your projected out of money age?
This is a big deal. You obviously want your projected out of money age to be after your expected longevity.
The NewRetirement Planner makes it easy to identify this number and find ways to improve your situation.
7. Have does your investment strategy need to change for retirement?
You have probably spent much of your working life saving and investing. As you approach retirement, you need to shift from a focus on accumulation (saving, saving, saving) to spending (efficient use and drawdown of your assets).
Retirement is a good time to reassess your investment strategies.
8. Are you too dazzled by the allure of retirement?
If you spend your days dreaming about what it will be like to kick up your heels during the golden years, you might be more likely to retire sooner than some of your peers, at least by a couple of years, according to a CRRBC study.
The allure of retirement can influence some to leave the workforce early, even if there’s a cost to financial security.
Don’t rush into retirement if you cannot afford it.
9. Have you considered transitioning to retirement?
Instead of quitting cold turkey, the ideal might be to transition to retirement — go part time and gradually phase out of work.
In AARP’s survey, Staying Ahead of the Curve, older workers indicated essential elements of their ideal job:
- Adequate paid time off (76%)
- A flexible schedule (72%)
- The opportunity to gradually phase into retirement (53%)
Options for transitioning to retirement might include:
- Retiring from your current job and figuring out how to earn money in a career that would be rewarding to you
- Taking a job – even a relatively low-paying job – in the field of leisure you most enjoy
- Working from home part of the time
- Cutting your hours at work and pursuing your passions now while still earning a paycheck
- If you could possibly take a year off of work as a retirement trial
10. Are you aware of the many benefits of work?
Did you know that scientists have strong evidence that suggests that work keeps you happy and healthy? There are many benefits of work:
- Work can give you a place to go every day which helps keep you feeling young and vibrant
- A job gives you social opportunities and mental challenges which keep your brain functioning
- Working gives your life a purpose which actually prevents aging
11. How is your health?
Unsurprisingly, health is one of the top factors that affects retirement decisions.
When you’re planning your retirement, you might have some idea of the age at which you’d like to close up shop for the last time.
However, health can get in the way of those plans. Some may have to retire sooner than originally planned from an abrupt change in health. You’re more likely to retire with poorer health.
35% of people between the ages of 55 and 59 claim poor health for their reason to retire. This is according to a study by the National Institute on Aging.
If you are retiring early due to health issues, you should still use a reliable retirement planner to help you assess your budget.
12. Do you need health coverage from your employer?
Healthcare is often the most expensive and unpredictable cost to plan for in retirement. In the event of any unexpected health issues, health insurance could protect you from incurring potentially high out-of-pocket costs.
Many retirees rely on Medicare for their health coverage. Those who retire before age 65 may not be eligible to begin receiving benefits.
And finding affordable health insurance can be difficult for people who lose group coverage provided by an employer.
“Working longer to continue benefiting from employer health coverage is a common reason investors choose to delay retirement,” says Ken Sutherland. He is President of LifePlan Group, a fee-based financial advisery firm in Raleigh, North Carolina.
This strategy is also popular among more than half of American workers. They say they plan to work longer to maintain access to their current employer-sponsored health plans, according to the Employee Benefit Research Institute.
13. Have you seriously evaluated your projected health care costs?
It may seem that if you have seriously considered healthcare costs, then you might not ever be able to retire.
The expected out of pocket healthcare spending for an average couple in retirement is estimated to far exceed the average savings of those households reports the Center for Retirement Research.
According Fidelity Investments, a 65-year old couple retiring in 2021 can expect to spend $300,000 in out of pocket health care and medical expenses throughout retirement. And, this estimate does not even include the possibility of needing to fund long term care.
Use the NewRetirement Planner to get a personalized estimate of your healthcare spending.
14. What’s your plan for a long term care need?
About 70% of of people who turn age 65 will need some type of long term care in their lifetime, according to the U.S. Department of Health and Human Services, but few are prepared to pay for that care.
The costs of long term care are exorbitant — ranging, on average, from $51,000-$102,000 a year according to this survey — and are not covered by Medicare.
However, long term care insurance is also extremely costly.
So, what is your plan for these costs? Explore 10 alternatives to long term care insurance.
15. How are you planning for other unknowns?
Inflation, stock market crashes, natural disasters, car accidents, and more. There are so many potential risks that could impact your financial well being.
It is important to have a best case and worst case retirement plan. The NewRetirement Planner makes this easy with optimistic and pessimistic scenarios.
16. When to retire? Have you calculated potential family needs?
Many around retirement age are members of the sandwich generation — you have dependent children as well as elderly parents. And they all may desire emotional and financial care.
If you are a member of the sandwich generation, then you need to calculate the future costs of supporting your children and your parents.
Costs can include college and weddings for your children and healthcare for your parents.
17. Have you met with a financial adviser?
The best person to ask, “When can I retire?” is probably a professional. You only get one chance to completely retire, and it is not something you can afford to get wrong.
Meeting with a financial adviser about when you can comfortably retire can give you peace of mind.
Choosing a retirement date is like solving a very complicated puzzle. There are lots of unknowns, trade-offs, and complex financial math. Many people do it on their own, but the right financial adviser can give you the reassurances you need.
In addition to the online Retirement Planner, NewRetirement offers fee-only planning services. Because we collaborate over the online plan, costs can be kept low.
18. Have you explored trade-offs?
Any retirement date is possible — especially with trade-offs.
There are so many different ways to retire. For some retirement means have millions in savings. Others can cut costs dramatically and live on Social Security alone. There is no one right way.
Hundreds of different levers can be adjusted to help you discover a plan to retire at an age that suits you — part time work, downsizing, delaying the start of Social Security, relying on passive income, and more.
19. How will your housing needs change over time?
From finally getting to spend time in your vacation home to downsizing, retirement abroad or moving to a continuing care residence, it is not unusual to spend your retirement outside of your long-time residence.
20. Do you know what you want to do next?
When you ask yourself, “when I retire,” are you trying to get away from something or to something?
A study from Merrill Lynch found that 9 out of 10 boomers see retirement as an opportunity for a new beginning — not an end of something. Retiring to something can be critical to your retirement happiness.
It is even better if what you choose to do in retirement is meaningful. Research from Oxford University finds that a meaningful life lessens the effects of aging.
In fact, people with a sense of purpose had a 15% lower risk of death, compared with those who said they were more or less aimless. And it didn’t seem to matter when people found their direction.
It could be in their 20s, 50s, or 70s — even when controlled for other factors that affect longevity like age, gender and emotional well-being.
The study found that a sense of purpose led to a longer life.
The ideal retirement age is whenever you have financial freedom and a good idea of what you really want to do with your time
We are all asking ourselves, “Should I retire?” “When can I retire?” “Can I retire now?” “…What about now?” While the answer to these questions is highly personal, you are probably ready if:
- You have a strong financial plan.
- You know how you want to spend your time.
If you are not sure about these factors, then perhaps you’ll benefit from delaying retirement. A delayed retirement can indeed make you happier, healthier and certainly wealthier.
Delaying retirement provides you with extra time to work longer and build a greater nest egg. It also allows you to claim higher Social Security benefits, which can boost your quality of life.
It may surprise you to learn that delaying retirement can enhance your happiness and health. Let’s not forget lifetime wealth.
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