What is your ideal retirement age?
There is no quick way to answer that, unfortunately. If you can’t wait to eliminate work stress from your life, or if you never want to leave your office job, it’s important to look beyond your job satisfaction when determining your retirement time. Doing so minimizes your chances of ending up in the job market in your 70s or wishing you had more time to work on your bucket list.
When choosing the right time for you, there are four factors to consider when determining your ideal retirement age.
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1. Your health perspective
Current poor health is an argument for early retirement, but there are financial considerations. You need enough savings available to cover your living expenses and healthcare costs, and the healthcare portion could be significant. A study by the Boston College Center for Retirement Research estimates that the average retiree will spend $ 4,300 a year on medical expenses, not including long-term care. Your costs may be higher if you have a history of medical problems.
However, if you can make it work financially, leaving the workforce early gives you an idea of retirement while you’re healthy enough to enjoy it. The alternative is to continue working until your health requires you to resign. At that time, you may also be too ill to check any item on your wish list.
On the other hand, if you don’t have health problems and everyone in your family lives to see 100 or more, you have time to continue working and increase your savings. And you will have to. Retirement planning often assumes that your savings should last 30 years. If you retire at age 65, you may need to squeeze out five more years of income from that retirement portfolio.
However, put off retirement until age 70 and benefit in three ways: It gives you more time to make 401 (k) contributions, shortens the time your savings need to maintain it, and maximizes your Social Security benefit.
2. The type of work you do
If you have a physically demanding job, like construction or nursing, you should realistically plan for a lower than average retirement age. Alternatively, you could brainstorm ways to transition your skills to a less demanding but related job. The transition from the workforce to a retail role, for example, could allow you to extend your career for a few more years.
You can usually keep working longer when you have a desk job, particularly one that can be done remotely. But think about how age is perceived in your industry and organization, and how that could affect your ongoing employment. Creative and technology organizations often value “new thinking,” which can sometimes be a euphemism for “younger workers.” Look around you and decide how likely you are to be expelled before you are ready to leave.
3. Your post-work plan
Boredom is a very real problem for retirees. A 2018 survey by homecare provider Home identifies boredom as the second most common reason retirees return to the workforce. If you don’t have projects to tackle, causes to support, classes to take, or places to explore, the novelty of unlimited free time could wear off pretty quickly. And it will happen even faster if work is your main source of social interaction and sense of satisfaction.
An older retirement age makes sense if you don’t have a clear post-work schedule. A younger retirement age is appropriate when your wish list is so long that you can’t even follow it.
4. How much have you saved
Finally, the balance in your retirement account influences your ideal retirement age as much as your health does. Ample savings obviously gives you the flexibility to retire whenever you want. Anemic savings can make you feel like you have to work forever.
The best solution for a low savings balance is a threefold strategy: increase your retirement contributions right away, streamline your living expenses, and delay retirement. If you’re over 50, take advantage of catch-up contributions, which increase the amounts you can deposit in your 401 (k) and IRA. In 2020, savers over 50 can contribute up to $ 26,000 to a 401 (k) and $ 7,000 to an IRA.
Take a broad view to determine your retirement age
Data from the Center for Retirement Research at Boston College set the average retirement age at 65 for men and 63 for women. But you are probably not average. To perfect your ideal retirement age, consider your health, career prospects, your outlook on life after work, and your finances.
Whether or not you get a number that seems right to you, it’s always a good strategy to increase your retirement contributions now. Consider it an investment in your future financial flexibility, because no one ever said, “Shoot, I wish I hadn’t saved so much for my retirement.”
