Deciding when to retire
You may be nearing the time when you can start to picture the next big step in your workplace journey—retirement. As you think about when to retire, make sure you have a financial plan.
Plan ahead for your retirement
The biggest mistake many people make is deciding when to retire with no financial plan in place. Once you’ve made a decision, started receiving benefits, and begun taking withdrawals from your savings, it may be too late to correct your course. Here are some simple ways to make sure you’re on track.
Calculate how much you’ll need in retirement
- Track your spending for 90 days to get a realistic view of your spending and predict your retirement expenses. Use this budget worksheet to get started.
- Most advisors say you’ll need about 85% of your pre-retirement income to maintain your lifestyle after leaving your job.
- Be sure to budget for healthcare. Even with Medicare, the average couple may need $250,000 to pay for healthcare in retirement.
- Consider how long you’ll live. The Social Security Administration provides a life expectancy calculator.
Determine your retirement income sources
Will you plan to work during retirement?
Many people now are taking a phased approach to retirement to maximize their retirement income—cutting back to part-time before they leave the workforce. Consider how working will affect your taxes and Social Security benefits.
When will you start taking Social Security?
There may be advantages to delaying the start of your Social Security benefits. If you haven’t seen a statement lately, log in to the Social Security Administration website to see your estimated benefits at early, regular, and delayed retirement dates.
How does your spouse’s Social Security benefit affect yours?
You may want to coordinate your payments with your spouse’s—starting one earlier and the other later.
How will you withdraw money from your retirement accounts?
Think about how and when you’ll take distributions from your retirement accounts, such as workplace plans and Individual Retirement Accounts (IRAs).
What factors will affect your retirement savings balance?
How will inflation and market changes affect your retirement balance? If you plan to be retired for 20 years or more, these factors can affect how long your savings may last. They also may reduce the amount you can take out of your savings each year to provide income.
Work with a financial professional
Educate yourself by reading this article. It's important first step in your retirement planning process. You also may want to enlist the help of a financial professional.