Retirement is often referred to as the “golden years.” Per US Money Reserve, the term was coined by Del Webb and his company who revolutionized retirement living in the U.S. through the Sun City brand of communities. The “bright” expression refers to the time of life dedicated to leisure, as in retirement. Most people opt to retire when they get older. However, when to retire can vary based on a variety of circumstances. People may ask, “Is now the right time to retire?” There are many important considerations that affect timing.
They may include:
- Age – This is among the most important factors when it comes to retirement decisions. A young retiree in good health can enjoy travel and other adventures with more time on their hands. However, when a person retires early, they will likely need to stretch their money to live without fear of funds running out. In most cases, it pays to wait until one can claim full Social Security benefits. While people can start to receive Social Security as early as age 62, many opt to delay retirement to age 70 to maximize benefit amounts. Per the SSA: if you decide to delay your benefits until after age 65, you should still apply for Medicare benefits within three months of your 65th If you wait longer, your Medicare medical insurance (Part B) and prescription drug coverage (Part D) may cost you more money.
- Health – This is a common predictor that affects retirement preferences. People faced with chronic health conditions are more likely to retire early. In part, this is likely related to work limitations. Physical conditions such as fatigue or pain and life expectancy also factor in when it comes to influencing retirement decisions. For those interested in retirement & survivor benefits, the SSA features a life expectancy calculator. The calculator shows the average number of additional years a person can expect to live, based only on sex and date of birth.
- Economy – The economy is another large factor which affects retirement decisions. People want to feel financially fit and confident going into retirement. The timing of retirement can be thrown off by a poor market. It is particularly difficult to reduce income when prices of goods are high. It is also challenging to sell real estate for profit in a poor economy. Homes are often the largest investments people make. A weak economy leads to declining home values, which hurts people seeking to sell a home to coincide with retirement. Folks may opt to postpone retirement to “wait out” the market or wait to sell. High mortgage interest rates may also prevent folks from investing in retirement property as well.
- Personal Finances – Personal financial fitness is a primary factor of retirement. Citizens Bank shares that by age 40, folks should have accumulated three times their current income for retirement. And “By retirement age, it should be 10-12 times your income at that time to be reasonably confident that you’ll have enough funds.” Per CBS News, there is a new survey from Charles Schwab. They asked 1,000 people with 401(k) plans offered by various providers what they believed they will need to have put away to retire in comfort. They state, “It’s a big figure: an average of $1.8 million.” NerdWallet explains that a common rule is to budget for at least 70% of your pre-retirement income during retirement. They explain, “This assumes some of your expenses will disappear in retirement and 70% will be enough to cover essentials.” However, that’s just a general rule.
- Psychological effects –The pleasant thing about retirement is that it allows people to reevaluate and choose where to allocate time and energy. Many opt to travel, take up new hobbies, and/or spend more time with family and friends. Some may sell their homes to move into 55+ communities or places with agreeable weather or cheaper taxes. While these new experiences can be fun, retirement ultimately brings forth a big change in lifestyle. Generally, work is a critical activity which provides a sense of purpose. People may postpone retirement out of stress, anxiety, or fear due to loss of work identity. Do seek support to deal with concerns that may interfere with living life to the fullest.
A new fun phase
Retirement is an exciting phase of life. This time of new beginnings offers freedom to follow dreams. But people want to get it right. Some may wonder, “Is now the right time to retire?” That question is understandable as knowing when to retire is complex. For instance, there are numerous individual variables to consider, such as those mentioned above. Ancient Greek philosopher, Pythagoras explained, “Choices are the hinges of destiny.” Since life choices like retirement impact the future, decisions should not be made in haste. Rather, they ought to involve preparation and planning, thoughtful reason and evaluation, and a touch of flexibility to time it right.
For information on the best places to retire, click here.
This article is purely informational and is not intended as personal or financial advice.