Not long ago, retirement was based on personal savings, Social Security benefits, and pension checks. Not anymore. Social Security is less secure, pensions aren’t as big, and personal savings highly dictate retirement finances.
For many retirees, knowing when to retire can be a confusing decision. But for older adults, clinging to a job can cause more harm than good. While you may still have a paycheck, your mental or physical health may suffer. To help you make an informed decision, we’ve spoken with experts and identified 10 signs it is time to retire.
You’ve Saved Up Enough Money
According to some financial experts, retirees should save 10 times their annual salary by age 67. Or they should follow the 4% rule and save enough to live off of 4% of their investments each year of retirement.
To determine how much money you need to save now, have an estimated expense budget for your retirement years. For example, a retirement filled with frequent traveling is more expensive than one spent at home with grandkids. A retirement calculator can help you determine how much you need to save.
You’re Debt-Free
It’s important to pay off all your debts before you start thinking about retirement. Credit card debt, a big mortgage, or a car loan can put a major strain on your finances. If you’re still paying one of these debts, postpone your retirement. Debt makes it harder for you to deal with unexpected expenses. Try to clear all your outstanding debts before handing in your retirement notice.
You have a diverse portfolio
It’s a good idea to create income sources for retirement, but it’s not a good idea to put all your eggs in one basket. Spread out your savings and investments to mitigate risk. The only way you can protect your wealth is through diversification.
If you’ve started building a retirement fund early, you can invest in stocks which are riskier but have a high return. If you’re almost retiring, it’s wise to invest in less risky money markets, treasury bills, or certificates of deposit.
A financial advisor can help you create a good retirement portfolio that suits your needs. They will consider your financial goals, risk tolerance, and time horizon to create a good portfolio. They can also restructure your portfolio over time to accommodate both market and personal changes (like changes in your needs and time horizon).
You’ve Got Good Social Security Benefits
A pension, annuity, or Social Security can provide a guaranteed lifetime income, ensuring you have a comfortable retirement. Visit the government’s Social Security website to check your projected Social Security benefits. You’ll have an idea of your passive income after retirement.
If you retire at 62, you’ll lose almost 30% of your Social Security benefits, so wait until full retirement age (70 years old) to withdraw your benefits. Retiring early reduces your benefits, and retiring later increases them. Waiting until age 70 could mean getting $1,500 a month instead of $2,500 a month.
You’ve Hit Retirement Age
You can start claiming Social Security benefits when you hit 62, but you’ll get more benefits if you wait until full retirement age. For people born between 1943 and 1954, the full retirement age is 66. For those born in 1959, that’s 67 years. If you decide to retire at 62, your monthly payment goes down by a massive 25%.
If you decide to delay claiming Social Security toil you reach age 70, you’ll get more money—132% of the amount you’d have collected at full retirement age
You Can Afford Healthcare
Recent studies estimate that a healthy 65-year-old female retiring today wiill spend approximately $155,000 on healthcare during her retirement. This is in addition to what Medicare already covers. A health savings account (HSA) can help you save for upcoming medical costs. Your savings are used to reimburse you for qualifying medical expenses. Start saving as soon as you can and don’t wait till you’re almost retiring.
Your Spouse Agrees
Retirement doesn’t affect just you, so make sure you and your spouse agree about it. Make sure you’re both financially and emotionally ready for it, and you’ll enjoy a fulfilling retirement together. Retiring at the same time can affect you financially and psychologically, so sit down and work out the best timing.
Communicate about your household finances as retirement will affect your income. Ensure you’re on the same page so you can heve peace of mind as you move into your next phase of your life.
You Job Is Taking a Toll On Your Health
If you are in excellent health, working a little longer may not affect your plans. But if you or your spouse are in poor health, delaying retirement could kill your chances to do certain things, especially if you’re planning an active retirement.
Some emotional signs that it may be time to retire include feelings of anxiety, stress, irritability, or disconnectedness from colleagues and your organization. You may be unfocused or unmotivated at work or feel restless or eager to make a life change.
You Don’t Support Your Kids
If your kids are grown up and earning their own income, you can think about retirement. But if you still support them, put your retirement plans on hold. You should also consider postponing retirement if you financially support your elderly parents.
Research reveals that more than 50% of American parents support their adult children. As college, housing, and healthcare costs keep increasing, supporting kids or aging parents becomes more expensive. You might want to postpone retirement for a few years if you have loved ones to take care of.
You’re Burned Out
A recent scientific study found stress can accelerate the natural aging process of the immune system in older people, increasing the risk of heart disease, cancer, and infectious illnesses.
If your job is strenuous on your body or mind, you may feel burned out and make the retirement leap. Overworking can cause stress, resulting in diverse health issues.
Closing Thoughts
Retiring too early can prevent you from enjoying retirement to its fullest. financial needs may force you to re-enter the workforce unexpectedly. So, take time to plan carefully to ensure you retire at the best time.
Alice is a writer and editor for Gainful Retirement. She is passionate about helping retirees live fulfilling lives without financial constraints. She puts a lot of time and effort conducting market research to identify common issues faced by retirees. Her passion is to help you enjoy retirement and solve the most pressing issues you face.