It’s the million-dollar question—What is my ideal retirement age? It would be great if there was a computer program that collected all your information, calculated all the scenarios for your unique personal circumstances and then gave you the perfect answer. Unfortunately, that doesn’t exist. But there are some keys that may help you find the answer.
How’s your health
If you’re in good health, your ideal retirement age may be later. Continuing to work would
- Give you more time to save money in your 401(k) account and collect the employer match.
- Shorten the amount of time you have to withdraw money from your savings.
- Maximize your Social Security benefit.
- Stay on your employer’s health insurance plan
However, if you’re in poor health, an early retirement age may be best. The question is, can you afford to retire early even though your health is not great. The Center for Retirement Research at Boston College estimates the average retiree will spend $4300 every year on medical expenses. And that doesn’t include long-term care.
How long did your ancestors live
History doesn’t always repeat itself, but it often rhymes. And while looking at ancestry longevity isn’t perfect it can be an indicator. Combining longevity with the quality of health those ancestors had may give you guidance about your future.
What kind of work do you do
Physically demanding jobs often push people to earlier retirement ages. Years of hard work take a toll on the body and a decision is made to hang up a career early in order to preserve as much quality of life as possible.
Even if your career has been physically demanding, but you want to continue working, think about ways to use all that experience and knowledge in a different role. Perhaps there’s a management or supervisory role where you work, or you can consult with businesses similar to the one you’ve been working for.
What will you do after you retire
If you’re not sure what you’ll do when you retire, other than have a lot of time on your hands, then retiring at a later age makes sense. The fact is, people need something to do—a reason to get out of bed every day. I’ve had many clients who went back to work to have something to do and to be around people. Many have said, “There’s only so much golf I can play and some many fish I can catch.”
If, on the other hand, your bucket list is so long you’re not sure you’ll ever get it all done, an earlier retirement age is something to consider. A long bucket list is a reason to get out of bed every day, too.
How much do you owe
The answer to that question may decide your retirement age for you. If you’ll be debt free in the foreseeable future, then that may be when you retire. But if that’s not possible, will your savings and sources of income allow you to continue making payments and still live the lifestyle you want. If not, a later retirement age, or winning the lottery, are the most likely possibilities.
Will you have enough savings
Sometimes ideal retirement age and the size of your retirement savings don’t match. If you find yourself with a smaller retirement nest egg than you need to maintain your standard lifestyle:
- Increase your retirement contributions
- If you’re over 50, take advantage of catch-up contributions to your 401(k) and IRA
- Rework your budget
- Determine needs versus wants
- Delay retirement
How much retirement income will you have
An important factor in determining your ideal retirement age is not necessarily how much money you have in the bank, but how much retirement income you’ll have. Retirement income typically comes from Social Security, pensions and part-time work. If you need more, what are other ways to generate income after you retire?
How much will you receive from Social Security
Social Security is a major factor in most retirees’ income. But Social Security is designed to replace about 40 per cent of the average person’s pre-retirement income. So, if you need a larger payout from Social Security, you’re most likely looking at an older retirement age.
For every year you delay receiving Social Security between your Full Retirement Age (FRA) and age 70, the amount of your Social Security benefit goes up by 8 percent each year. That means you may get as much as 32 percent more by waiting until 70 to begin your benefits.
Disclaimer
This information is presented for informational purposes only and does not constitute an offer to sell, or the solicitation of an offer to buy any investment products. None of the information herein constitutes an investment recommendation, investment advice or an investment outlook. The opinions and conclusions contained in this report are those of the individual expressing those opinions. This information is non-tailored, non-specific information presented without regard for individual investment preferences or risk parameters. Some investments are not suitable for all investors, all investments entail risk and there can be no assurance that any investment strategy will be successful. This information is based on sources believed to be reliable and Alhambra is not responsible for errors, inaccuracies, or omissions of information. For more information contact Alhambra Investment Partners at 1-888-777-0970 or email us at info@alhambrapartners.com.
