Are you dreaming of retiring but aren’t sure where to start? You’re not alone! Figuring out when to retire and what to do next can be daunting, but it’s definitely worth taking the time to get it right. It’s normal to feel a little overwhelmed – after all, retiring is a big change. But don’t worry, we’re here to help. In this post, we’ll discuss some important things you need to think about before calling it quits. Plus, we’ll give you a timeline for when you should retire. Once you have a plan in place, you can start working towards your retirement goals and enjoy a comfortable retirement. So read on and get ready to take the next step!
Before we get started with planning how and when you should think about retiring, there are some facts that are as important as they are worrying.
When it comes to retiring, there are certain barriers that women in particular face. Not only do women still tend to have lower wages, but they also have lower annual benefits than men which can make retirement a scary thought for many as they realize that their savings may not be enough to sustain them for the next 20 years of living in retirement. Data from the Social Security Administration (SSA) in 2019 indicated that the average annual retirement benefit for women 65 and above was $13,505 compared to that of men, which was $17,374.
This difference in benefits is just one of the things that women need to factor into their retirement planning. Another consideration is the average life expectancy for women, which tends to be longer for women than men. This is important to consider when planning for retirement because it means that women need to make sure their savings will last throughout their retirement years.
All of that means that women face an extraordinary amount of pressure when it comes to retirement planning.
So, how do you get to the point where you can retire? Well, it’s not as simple as just stopping work one day. Here are a few things you need to think about before you can retire comfortably:
This is a question that you need to think about both in terms of your personal goals and in terms of your financial situation. If you want to retire early, you’ll need to have a solid plan in place for how you’ll fund your retirement years. This may include saving more money now or working part-time during retirement. On the other hand, if you’re happy with your current job and don’t mind working a little longer, you may be able to retire later and still have a comfortable retirement.
As you’re starting to think about when you want to retire, these are a few factors to take into account.
Some pros of retiring later (and cons of early retirement):
-You have a chance to max out your retirement savings which can lead to a more comfortable lifestyle in retirement.
-You can delay taking Social Security benefits which means that you will get a higher monthly benefit later on.
-You may have the opportunity to retire with a pension if you stay with the same company for a long period of time.
-Working longer can keep you active and engaged mentally and socially, which can lead to a healthier lifestyle overall.
Some cons of retiring later (and pros of early retirement):
-You run the risk of not being able to physically do the things you want to do in retirement if you wait too long (i.e. travel, golf, tennis, etc.).
-You may not have as much time to enjoy your retirement if you wait too long to retire.
-Working longer can lead to more job-related stress which can take a toll on your health both mentally and physically.
You can become eligible for Social Security at 62, but you won’t qualify for the full monthly benefit until, at the earliest, 66 if you were born between 1943 and 1954. If you claim benefits before you reach your full retirement age, you’ll get a reduced benefit. For example, if your FRA is 67 but you claim benefits at 62, you’ll get about 70% of the monthly benefit because you’re starting five years early. And those extra years of waiting will give you a much higher benefit to live on in retirement. The SSA estimates that someone who waits until 70 to start collecting will get 76% more than if they’d filed at 62. On the Social Security Administration website, you can see the different levels of benefits you can receive depending on the age you choose to retire and the year you were born.
How long you are going to live after retiring is also important to keep in mind. Although no one can know how long we have left, it is important to make sure you have enough saved up in case you live much longer than the average life expectancy.
The SSA has a free online calculator to predict the average life expectancy for both men and women that although doesn’t account for different health and lifestyle factors, is a good starting point to get you thinking. According to the Center for Disease Control, the life expectancy for a 65-year-old woman is currently 20.3 years, which means that the average woman can expect to live until she is 85 years old. But, this is just average. Some people will live longer, and some people will not make it to their mid-80s. If you want to err on the side of caution, you should plan for a longer retirement. A good rule of thumb is to plan for a retirement that is 20-30 years long. That way, even if you do not live as long as the average person, you will still have enough money saved up.
This is a tricky question to answer because it varies from person to person.
One of the biggest mistakes people make is not saving enough money for retirement. According to Northwestern Mutual’s Planning & Progress Study in 2019, 22% of Americans have less than $5,000 saved for retirement. This is not nearly enough to sustain most people for 20+ years in retirement. Most advisors suggest that every year you save 15% of your pre-tax salary in order to have a comfortable amount of retirement savings. Although this is a good place to start, this number is a guideline that assumes you began saving early and often.
To determine a more precise amount, you should use our retirement calculator to plan how much you need to have saved up and how to get there. There are many different types of calculators out there, but they all essentially ask for the same information:
This will depend on your current health and lifestyle, as well as how long you expect to live. Some people may need less money in retirement if they have paid off their mortgage, while others may need more money if they plan on traveling or have expensive hobbies. Before you can ask yourself what your retirement lifestyle is going to be like, you need to take a look at your overall financial picture.
Here are some important questions to ask yourself:
-How much debt do you currently have?
-Do you have a paid-off mortgage?
-What are your current monthly expenses?
-Do you have any medical conditions that require regular treatment or medication?
These types of questions are important to ask yourself because they will give you a good starting point to figure out how much money you need to have saved up. If you have a lot of debt, you will need to make sure you have enough saved up to cover those payments each month. If you don’t have a paid-off mortgage, you will need to make sure you have enough saved up to cover your mortgage payments each month. And finally, if you have any medical conditions that require regular treatment or medication, you will need to make sure you have enough saved up to cover those costs as well.
Because there are so many things to take into consideration, it is important to sit down with a financial planner to help you figure out how much money you need to have saved up. A financial planner can help you take a look at your overall financial picture and make recommendations on how much you should save each month. In addition, because, you can’t just put your money in a savings account and forget about it, financial planners can be incredibly helpful. You need to actively manage your money and make sure it is working for you. This includes making sure you are saving enough each month, investing your money wisely, and monitoring your accounts regularly. This involved process means that often, it’s best to leave it to the professionals.
If you are just beginning to save for retirement, make sure that the money that you put away into your retirement account(s) is money that you can afford to ‘part with’. The money that you dedicate to your retirement is money you should consider gone or not yours anymore. It is money that once you put away, should not be touched until you are retiring because accessing/withdrawing these funds early means that you can lose principal and interest and even have to pay an early withdrawal fee in most cases. In our Retirement Plans article, we cover the different types of retirement account options available and where you should store your retirement savings.
This is probably one of the most important questions to answer when you’re trying to figure out how much money you need to have saved for retirement. Your sources of income will determine how much money you’ll have coming in every month, and that will dictate your budget.
Your sources of income in retirement will be different than when you were working. You will no longer have a steady paycheck coming in, so you need to make sure that your other sources of income are enough to sustain you.
Some sources of income in retirement include:
-Social Security benefits
-Retirement savings (IRA, 401k, etc.)
You need to decide which of these income options is both realistic and feasible for you and then figure out how much money you will have coming in from each of those sources every month. Deciding how much you need to have coming in after you retire can be complicated to figure out, but there are a few ways to estimate how much income you’ll need in retirement.
This rule of thumb says that you can withdraw 4% of your nest egg each year and not run out of money. So, if you have $1 million saved, you could withdraw $40,000 the first year of retirement, adjusted for inflation each subsequent year.
This rule of thumb says that you should plan to replace 50-80% of your pre-retirement income in retirement. So, if you made $50,000 per year before retiring, you would need $25,000-$40,000 per year in retirement.
Forbes suggests that you should have an annual income of 55-80% of your pre-retirement salary in order to continue living the lifestyle you are accustomed to. Where in this percentage you should be aiming for depends on the type of lifestyle you want to have post-retirement and how much you have saved. You need to make sure that your sources of income are enough to cover your expenses in retirement. It can be helpful to speak with a financial planner because this may mean making some adjustments to your lifestyle, such as downsizing your home or cutting back on travel.
Making your money last throughout retirement is a top concern for many people. You need to make sure that you have enough money to cover your expenses for the entirety of your retirement, which could be 20+ years.
Making your money last is one of the most important aspects of retirement planning. You need to make sure that you don’t outlive your money, and there are a few ways to help make that happen. The first thing to think about is how long your retirement is going to be. As we discussed, there are different pros and cons to benefiting earlier rather than later and the impact that will have on your funds is crucial to consider. The earlier you retire, the larger ‘nest egg’ you will need to have saved up in order to support yourself.
But, there are other things to consider. The best way to make your money last is by creating a budget for your retirement expenses. This will help you figure out how much money you need to have coming in every month and see where your money is going which will allow you to make adjustments accordingly. Your retirement expenses will be different from your current living expenses, but they can be just as expensive, if not more. You need to think about all of the different types of expenses you will have in retirement and make sure you have enough money saved up to cover those costs.
Are you prepared for the unexpected? This includes things like long-term care and healthcare expenses.
Long-term care can be very expensive, so it’s important to have a plan for how you will pay for it, should you need it. A conversation with your family about your wishes and expectations when it comes to long-term care is also important. You’ll also need to ask yourself what your plan is for healthcare expenses in retirement. You need to account for medical expenses as you will likely have more health issues the older you get and healthcare costs tend to go up as you age. Healthcare costs have been rising steadily for years, and they are not expected to slow down anytime soon. Even if you have a good health insurance plan, you will still likely have out-of-pocket healthcare costs in retirement. A recent study found that the average retired woman will spend $160,000 on healthcare while in retirement.
The bottom line is that you need to make sure you have enough saved up for retirement. This number will vary from person to person, but it is important to sit down and figure out an estimate of how much you will need. Once you have a number in mind, you can start putting a plan into place that takes into account making decisions about your desired post-retirement lifestyle, smart investments, and a budget. You need to think about all of these things before you can retire comfortably. Retirement planning is crucial to a comfortable retirement, so make sure you give it the time and attention it deserves.
Making the decision of when and how to retire is a difficult one, and there is no right answer. It depends on your personal circumstances and what you want out of retirement. This isn’t a decision you have to make alone and speaking with a financial planner may be beneficial to help you make the best decision for your unique situation.
Start thinking about these things now to begin planning for your retirement sooner rather than later and you’ll be on your way to a comfortable retirement in no time!