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Deciding when to retire

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Deciding when to retire is a major decision that requires people today to consider a number of factors. The decision is based on a number of non-financial factors, such as your health and the type of things you want to do in your retirement. Of course, when to retire is a decision that will most likely be controlled by financial factors. Your savings, when and how you decide to take social security, and even the cost of your health insurance are incredible important parts of retirement planning.

For years, financial planners have talked about the importance of saving for retirement. While many planners would prefer that everyone have enough in a saving account to pay for the next thirty years of expenses, the truth is that this is rare and probably not even necessary. Instead, the amount a person or couple has in a saving account is only a small part of their financial picture. The amount that you are expecting to receive from Social Security, a pension, annuity, or even a whole life insurance policy should also be considered.

Because of this, it often makes sense for people to start their retirement planning by figuring out their expenses. Think about how much you will spend each month on bills, but also plan to pay off as much debt as possible directly out of a saving account. Ideally, come up with several different spending plans before you proceed with the next step. Remember to include expenses you don’t have now, such as increased health care and insurance costs. Keep in mind these costs can vary based on when you decide when to retire.

The next step of retirement planning is to compute your expected income. Again, you will want to create several different plans. Look for information on Social Security and figure out several different ways to take your benefits. Keep in mind that Social Security offers people different amounts of money per month based on when they decide when to retire. Also look at different ways to spend down your saving plan. Specifically, look at ways to invest what you have in savings, and consider how much you can reasonable withdraw every month when you retire.

Finally, remember that when to retire isn’t an absolute decision. Many people choose to retire, then make a decision to go back to work. Part-time and/or consulting work can be a good way to continue receiving benefits when you retire and earn enough extra money that you will be able to cover extra expenses.

Deciding when to retire is a major decision that will probably take years’ worth of planning. Don’t be surprised if you develop several different plans, and don’t be surprised if you see those plans change once you retire.



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