One of the most common questions I get from people is, “When can I retire?” My typical answer is “the day after you can afford to do so, and not a single day before or after that.”
By retiring too early, you run the risk of not having enough monthly income to maintain the lifestyle you were hoping for. Having to live Social Security check to Social Security check in retirement and having to worry how every dollar is spent is not most people’s vision of retirement. It would be frustrating watching your friends do things you can’t afford to do. On the flip side, many people work well beyond what they need to, not leaving themselves enough time to enjoy the fruits of their labor. We are all just one phone call away from having our worlds turned upside down. A major sickness or accident or death of a loved one can dramatically change our retirement goals.
The dilemma is deciding the optimal time to retire. You want to retire early enough to still be healthy enough to enjoy it, but not too early, so that you regret it. The logical solution is to run the numbers, and let the facts and circumstances make the decision for you. Deciding to retire should not be an emotional decision, but rather a well thought out process.
Some key decisions that have to be considered:
- When to start your Social Security benefits
- Taking your pension as a lump sum or as monthly income
- Which accounts to draw supplemental income from
- Most importantly, how much can you take from those accounts without putting yourself into potential jeopardy
This is why you need to keep re-running your numbers even after you retire, to make sure you are still on track for your comfortable retirement. Health insurance is another key variable that may impact your retirement date. If you plan on retiring before age 65, you will have to determine where you will get your health insurance prior to becoming eligible for Medicare, and budget for a higher payment accordingly.
In addition, you need to make sure that you are emotionally ready for retirement. Some people, especially men, delay their retirement simply because they can’t imagine what they will do once they quit working. The solution is to start working on your own retirement “bucket list” years before you actually decide to call it quits. This way instead of having to dread making the decision, you’ll have something to look forward to.
My last tip is to make sure you are on the same page as your spouse or partner. I have been in situations where one person starts talking about retiring, and it was the first time the other had heard about it. Let me tell you, it can make for a very uncomfortable meeting! The key is to make sure both of you are in agreement as to your retirement plans. This means having those conversations years before you actually retire. Make sure you both agree on the amount you will need in monthly income, and what date you are targeting. It’s a lot easier to reach your goals, if you are both pulling on the same side of the rope!
Your retirement should be a planned event and not left to happenstance. This means putting in the planning and work years or even decades in advance. Most people would not take a vacation by just walking up to the airline counter and just let them hand you a ticket, without first knowing the destination and planning the trip. Your 20 to 30 year retirement deserves more than just relying on your hunches. This means getting professional advice.
It’s never too early to start planning. We are here to help guide and coach you through those critical financial decisions that will help determine whether you ultimately get to enjoy your retirement leisure years.