When deciding when to retire it might seem like a simple question, but it’s a question that most people will face through out their life. It is an increasingly complex decision and there may not be an easy answer. There are many opportunities as well as challenges that need to be faced when deciding that retirement is the next step.
Income analysis: The first step in retirement is to estimate how much income you will need and how much you will have in retirement. Look into your Social Security benefits, because for many this is the main source of retirement income. Knowing when those benefits will become available and what they will be is important.
To begin receiving benefits the eligibility beings at age 62. However, if you begin to receive benefits at 62, there will be a reduction in the amount of benefits received compared to waiting until the full retirement age. If you plan to continue working and take your benefits prior to the full retirement age, you might have your Social Security benefits reduced if your income level is too high. You could receive increased Social Security benefits of 8 percent more per year until age 70, when the maximum Social Security benefit becomes available.
You will fully understand retirement after reviewing sources of income and review potential expenses. Food, housing, health care and money for travel or hobbies should all be taking into consideration. Its best to have an additional sum of money set aside for unexpected expenses.
Health care costs: If you take a closer look into employer-provided benefits will be available in retirement, such as health, dental and vision insurance. Coverage in these areas will go a long way in protecting retirement funds and budgeting for premiums or out of pocket expenses.
The federal Consolidated Omnibus budget Reconciliation Act (COBRA) offers some employers medical coverage for those retiring before the age of 65, but usually for 18 months. Medicare will kick in at the age of 65 and that will be important to consider. Medicare does not cover all health care costs or most nursing home costs.
Employee-sponsored benefits: Leaving the workforce might also mean walking away from employee sponsored benefits such as life insurance and disability insurance, and well as vision and dental plans. Find out if any of these benefits can continue into retirement and if not, you should budget accordingly for those expenses.
Phased retirement: Reducing hours with a current employer or working part-time somewhere else might be appealing choices. Taking the time to develop a renewed budget given a new income level is important to help determine how much retirement savings need to be accessed now rather than later.
Phased retirement might bring the bonus of being able to maintain employer benefits such as health insurance and employer matches to 401Ks and could mean a higher Social Security benefit.
Personal readiness to retire: There is only one question, are you ready? Retirement can be very appealing and could lead to extra family and friends time, travels and new-found hobbies. On the other hand, retirement could be too much for some because it is a lifestyle change. It is important to take some time before retirement to think about what to do next for personal fulfillment and to maintain a happy and healthy lifestyle.