Factors for Determining What Age to Retire

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Factors for Determining What Age to Retire

4 Key Factors for Determining What Age to Retire

You may be eager to retire in your 50s, early 60s or immediately after turning 65—but will you be financially ready? The age at which you retire can have major implications for your and your family’s long-term financial security. If you retire too soon, you run the risk of running out of money.

So how do you determine whether you’re truly able to retire securely? Here are four key factors to consider:


1. How much you’ve saved

A common rule of thumb is that you can safely withdraw about 3-4 percent of your retirement savings annually and have a low risk of running out of money during your lifetime.1(Keep in mind that the guideline assumes that you continue to keep a sizable portion of your investment in equities through at least the early years of retirement.)

Let’s say you retire with $500,000 in savings. If you feel comfortable withdrawing 3 percent of your savings annually, you can assume you will withdraw about $15,000 each year of retirement. For some people, that’s enough money—especially if they no longer pay a mortgage and get decent income from Social Security or another retirement income source, such as a traditional pension. For others, $15,000 may be nowhere near enough to cover their expenses and lifestyle goals. 


2. Your Social Security benefit

Depending on your earnings history, you might have a sizeable Social Security benefit waiting for you in retirement. You will also have to decide when to start claiming those benefits. You can start as early as age 62, but your benefit will be about 25 percent less than if you wait until you reach full retirement age (66 if you were born between 1943 and 1954 and 67 if you were born 1960 or later.)2

Check your most recent Social Security Statement to find out how much of a monthly benefit you are estimated to receive, and at what age. You can check it anytime online at https://www.ssa.gov/myaccount/.

Your Social Security is based on your highest 35 years of earnings. So, if you don’t have at least 35 years of work history, it can make sense to work longer in order to boost your Social Security benefit. Also, working longer may allow you to delay claiming benefits—which will automatically raise your benefit amount.


3. Your plans and goals

How are you planning to spend your retirement? Are you going to travel the U.S. or the world? Pursuing a high-cost hobby? Or are you going to spend your time on more budget-friendly activities such as reading, biking, volunteering?

Your plans and goals play a big role in determining how much you need to save for retirement. So it’s worth thinking about what those plans and goals are at least five years before you intend to retire.


4. Your feelings toward work

Some retirees discover too late that they liked working more than they thought. They may have felt burned out, but ultimately valued the mental and physical stimulus that working provides. 

Because of this, you might want to consider “phasing” into retirement—cut back your hours and work part-time or become an independent contractor for your former employer, but don’t stop working altogether.

This can be a happy medium, providing you with more free time than you had when you worked full-time but also allowing you to continue earning an income.

Before you automatically assume you will retire at age 65 or any age, make sure you’re truly ready and have a solid game plan for retirement. It might be the smartest decision you ever make.

1 – Barron’s, “Retirement Rules: Rethinking a 4% Withdrawal Rate,” April 11, 2015

2 – SSA.gov (https://blog.ssa.gov/2017-brings-new-changes-to-full-retirement-age/ )


Prepared by WSJ Custom Studios.

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