It’s no surprise then that little more than half of Americans surveyed by the Transamerica Center for Retirement Studies say their biggest concern about retirement is outliving their money. Starting to take money out of those retirement accounts after a lifetime of putting money into the accounts can be scary.
Here are the key indicators that signal if you’re ready to consider retiring or if you should delay, as detailed in this recent article from Investopedia’s, “6 Signs That You Are OK to Retire.”
1. You’ve Hit Full Retirement Age. If you were born between 1943 and 1954, your full retirement age is 66. If you were born after 1959, it’s 67. You can start claiming Social Security benefits as early as 62, but your benefits will be much higher, if you wait until your full retirement age.
2. Retire Debt-Free. If you have a ton of credit card debt or still owe a lot on your home or car, you may want to wait to retire because when you’re on a fixed income, a big mortgage or car payment can put a major dent in your finances. Before you retire, pay off all your debts, if possible, and get on a budget.
3. Not Financially Supporting Your Kids (or Parents). If your kids still live with you–or you’re paying for their college education–you probably should wait on your retirement plans. Likewise, it might be smart to delay retirement if you’re financially responsible for your elderly parents.
4. Make a Retirement Budget. Prior to retiring, calculate whether you can live comfortably on your post-retirement income. Add up your mandatory monthly costs, like a mortgage or rent, groceries, and utilities. Next, add in your 'wants,' like travel, entertainment shopping and eating out. You can then determine whether you’ll have enough retirement savings to cover all of this. Add your Social Security payments, pension, retirement account distributions and any other sources of income. Your retirement budget (if you retire in your mid-60s) shouldn’t be more than 4% of your investments, plus Social Security and pension payments.
5. Review Your Portfolio. You’re going to depend a lot on your investment portfolio in retirement. If you haven’t had a portfolio review in a while, do it soon. Reassess your portfolio and determine if you need to make any modifications. As you get close to retirement, you may want to move to lower-risk investment strategies to protect your wealth.
6. Plan with Your Spouse. Unless you live alone, retirement will have a major effect on your spouse or partner. Retirement should be reviewed together. Look at how the reduction in income will affect your lifestyle, and consider what changes may need to occur to make it enjoyable for you both.
It’s not all about the money. Many people are also surprised at how quickly they are bored in retirement. What you will do with your time? This may be the time you devote to family, write a novel, volunteer in the Peace Corps, or perfect a new talent. However, knowing what you want to do, is as important as knowing how you’ll support yourself because ultimately they go hand in hand.
At Family Estate Planning Law Group, we want to help you ensure that you retire at the right time and retire comfortably. That’s why a key component of our ongoing client care program involves working with you and your financial advisor (if you have one, and we strongly encourage you consider having one), to plan out your retirement and align your life, wishes, and assets with your estate plan.
Reference: Investopedia (June 1, 2018) “6 Signs That You Are OK to Retire”