Topic: Retirement

Written By
Joseph R. Hearn

Deciding when to retire is non always easy. Many people simply base the determination on their birthday, simply there are a whole host of other factors that should weigh into your thinking equally well. Here are seven key things to consider:

  1. Your bank account: When you retire, your portfolio takes over the job that the payroll department handled while you were working. If yous have to cut yourself a paycheck each month, it makes sense to be sure that your bank business relationship is up to the job. A common dominion of thumb puts a sustainable withdrawal rate at about iv percent. Another way to look at that would exist to shoot for retirement savings that are 25 times larger than your expected almanac withdrawal. If you are not quite there still, information technology might make sense to work a fiddling longer (or work part-fourth dimension), save more, or make cuts to your anticipated retirement budget.
  2. Your bucket listing: Before retiring, you should know the answer to 3 central questions: What do I desire to practice? Where do I desire to exercise it? Who do I desire to practice it with? Knowing answers to those questions will aid requite you purpose and a plan for how to spend your time. If your key reason for retiring is to escape your job, don't pull the trigger but yet. Wait until you accept a plan in identify for meaningful pursuits. Doing so will probable help y'all avert a bad example of retirement "buyer's remorse."
  3. Your health: If you are in first-class health and have longevity in your family unit, working a piffling longer may not significantly cutting into your plans. Not so if you or your spouse are in poor health. In that example, delaying retirement could mean your chances to exercise certain things are gone for good. This is specially true if you are planning an active retirement. Have an honest look at your health and life expectancy and counterbalance that into your determination about when to retire.
  4. The markets: Investment returns during the first decade of retirement are extremely important. Retire on the cusp of a bull market and your portfolio volition likely build enough padding to withstand future downturns and withdrawals. Retire and begin taking withdrawals at the beginning of a carry market, however, and those early losses will greatly increase your odds of running out of money. Experts refer to this as sequence risk, but information technology could just as easily be referred to as luck. No one has a crystal ball, but if the economy appears poised for a downturn, yous might want to delay retirement (and withdrawals) until things rebound. The same is true if your portfolio has significant losses in the years leading up to retirement. In that case it might make sense to continue working until your investments accept a take a chance to recover.
  5. Wellness care benefits: Recent studies by Fidelity and others estimate that a 65 twelvemonth old couple retiring today volition need between $200,000 and $400,000 to comprehend health care costs during retirement. That is in addition to what Medicare already covers. Having a program to cover those costs — whether by savings, individual insurance, or a Medicare supplement policy — is an important consideration when deciding when to retire.
  6. Social Security benefits: Retiring at 62 would hateful a permanent reduction of near 30 percent to your Social Security benefits compared to what they would exist if you lot waited until your full retirement age. Merely like retiring early reduces benefits, retiring later increases them. Those born after 1943 tin can await an eight percent increment for each year they await to claim benefits after full retirement age. This increase goes abroad at age 70, so working until then volition consequence in maximum benefits.
  7. Your spouse: You would exist surprised at the number of couples who are blindsided by differences over retirement dreams, plans and expectations. One wants to keep working, while the other is ready to exist done. One wants to movement to the embankment and the other wants stay close to the kids. Are y'all on the same folio with your spouse when it comes to retirement? Make sure you do your planning together so you tin work through whatever differences early and enter retirement as a team.

As y'all tin see, deciding when to retire is a circuitous decision with many moving parts. By giving it the fourth dimension and attending it deserves, y'all can aid ensure that your retirement gets off on the right human foot.

FPA member Joseph R. Hearn is a Vice President at Teckmeyer Fiscal Services, LLC and author of If Something Happens to Me.