Deciding when to retire is a question most people will face at some point in their lives. Though it might seem like a simple question, deciding at what age to retire is an increasingly complex decision that needs to take into account many factors.
While there is not necessarily an easy answer to the question, fully understanding the opportunities and challenges faced in retirement is a critical first step in helping to decide to retire at 55, 65, or beyond.
Here are five initial considerations to keep in mind.
Income analysis. The first and probably the most critical step in determining when to retire is to estimate how much income you will need, and how much income you will have in retirement. Take a look at potential retirement income sources including Social Security benefits. For many, Social Security benefits are the main source of retirement income so knowing when those benefits will become available and what they will be is important.
Eligibility to begin receiving benefits starts at age 62. However, keep in mind that by receiving benefits starting at 62, there is a reduction in the amount of benefits received as compared to waiting until full retirement age (which is determined by your year of birth). Also, if you plan to continue working and take your Social Security benefits prior to full retirement age, you might actually have your Social Security benefits reduced if your income level is too high. Additionally, if you wait to begin receiving Social Security benefits until after your full retirement age, you could receive an increased benefit of 8 percent more per year until age 70, when the maximum Social Security benefit becomes available. (It is recommended to refer to the Social Security Administration to discuss your specific situation.)
To fully understand the complete financial picture of retirement, after reviewing sources of income, review potential expenses. Food, housing, health…