Are you thinking about retirement and your goals, but you’re stuck on the decision to retire now or work longer? Many people are in the same situation as you. Understanding the process of retiring now or waiting is something that you need to take seriously.
We take our clients through this very process during their retirement planning so that they know when retirement is right for them.
Our Process of Helping Clients Understand Decision to Retire Now or Work Longer
Financial readiness, such as your ability to retire now, is something that you need to understand first. Financial readiness entails understanding how much you’ve accumulated up to this point in retirement, such as your:
- Taxable accounts
Are these accounts enough to help pay for your lifestyle for the next 20 – 30 years? Of course, this figure will be very different from one person to the next because everyone’s spending is very different.
Understanding Your Retirement Budget
Your retirement budget is something that you must be very cautious about. For example, it’s difficult to save up $1 million, but it’s very easy to spend it if you have uncontrolled spending. You want to consider your:
- Utility bills
- Car payments
- Buying a second home
- Leaving money to grandkids
- Paying for your grandkid’s college
Learning your needs, wants and legacy will help you understand whether you’ve saved enough money for retirement. You may be able to enter into semi-retirement or full retirement based on these figures, but you also need to think about your health.
Health in Retirement
Health is something that is a pure luxury in life. A good example of this is one of our clients who was 61 with severe anxiety, stress and heart issues. The client wanted to know if he had the option to retire, and he certainly did have this option based on his savings for retirement throughout the years.
It was very beneficial for him to decide to retire now to alleviate the anxiety and stress he was feeling.
After weighing all of the pros and cons, he retired and still loves it.
However, it’s important to remember that you can also choose to:
- Retire fully
- Leave the stressful job for a part-time one
We have many clients come to us who are still very healthy and love their jobs. Often, people come to us at 70 and are still in great health and want to stay in their careers. You may be one of these individuals, and you can still choose to continue with your job or go part-time.
In these cases, where the person is in great health and loves working, we take it one year at a time to revisit this question.
Evaluating Personal Goals and Interests
Reaching retirement is the main goal people have, but they never actually know what they want to do when they’ve “made it.” We encourage you to determine what you want to do in retirement so that you can plan out what finances you need to meet to reach these goals.
If you can retire and want to, what will you do next? Sometimes, people find that retirement is too boring for them and that they want to return to work. Returning to work isn’t an issue, but if you have plans to reach for retirement and have a better idea of your goals, it can help provide you with clarity while working towards retirement.
Age often plays a role in people’s retirement because it will dictate different benefits for you. The following are a few major points that we would like to mention, but this list is not exhaustive by any means.
- 59.5 is when you can take money from an IRA without a 10% penalty.
- 62 is when you can take Social Security at a reduced rate.
- 65 is when you get Medicare and healthcare coverage.
- 66 – 67 (depending on when you were born), or Full retirement age (FRA), is when you can receive the full amount from your Social Security.
- 70 is when you can get the maximum from Social Security.
- 72 (73 soon) is when you need to take required minimum distributions from your IRA.
If you want to retire before 65, you will have to obtain your own health insurance, which can be thousands of dollars a month if you have a spouse.
What are your family dynamics? If you’re the sole person earning an income, retiring may not be possible for you yet. However, if you retire and your spouse is still working, you may have enough money to retire while your spouse is working.
If you have kids or elders who are dependent on you, then you will need to take this into account when thinking about retirement.
It’s a fine balance when considering your obligations to family and learning to retire.
Health Insurance and Costs
Healthcare is expensive, and it’s something that everyone must consider when trying to decide when to retire. You likely work for a company that subsidizes your healthcare benefits, and most companies will stop these benefits when you retire.
You have a few options here:
- COBRA, or the option to pay for healthcare benefits that you received from your employer without the subsidies involved.
- Health saving accounts, which will help bridge you to 65 when you’re able to get Medicare.
If you retire at 62, there will be a 3-year period where you need to cover healthcare costs on your own.
Long-term care is something to consider, too.
There are a lot of “what-ifs” that you need to consider, such as providing for long-term care. Insurance is available here to cover these costs.
A few what-ifs are:
- Do you need to continue with life insurance?
- Do you need to pay for long-term care?
- Do you need to have part-time, in-house care?
Transferring the risk to insurance companies is something that is possible. You can also reallocate some of the funds that you’ve saved to put them into long-term care needs.
We covered a lot of topics that you need to consider, but there is also more to consider. If you begin going through these points, it will help you better prepare for retirement. You can schedule a complimentary call with us by clicking here.
However, we also have a lot of great, free courses that you can use to better understand your retirement options.