By Dan Miller, CFP®
For most Americans, retirement is the dream. The Gold Ring, what they have worked a lifetime to achieve. Sure, there are people who love to work and do not want that to ever change. But that is not for everyone. So, if you're one of the many people who wants to retire someday, the question arises of when is the right time? Some people would be fine retiring next week, while for some the answer is not quite so simple. So, let’s take a look at some things to consider.
Can You Do Without the Income?
If you're working in a well-paying career, it may be unlikely that you'll be able to bring in quite as much income once you are retired. There are exceptions to this rule of course. If you've diligently saved a portion of your income over a few decades, you may have enough stashed away to approximate your working income. But if your ability to draw down your nest egg is limited by its size, that may be a sign that you may need to keep working. Additionally, it's important to remember that most people cannot draw down from 401(k) and IRA accounts without penalty until age 59 1/2. So, if you're worried about having enough to tide you over until you hit this magic age; staying in the workforce for a few years may be a good idea.
You Need Insurance
As everyone knows, health insurance is expensive. And the older you get, the more likely you are to need it. Therefore, going without adequate insurance anytime in your life means you are taking a big financial risk. If your employer offers health insurance for retirees, and you have enough income to maintain your standard of living, you may be ready to hand in your notice and leave the workforce. On the other hand, if your employer does not offer retiree health benefits, you may want to consider sticking around for a few years. Remember, Medicare doesn't come into play until age 65, so you'll want to make sure you have health insurance until that key point in your life.
You Don't Know What You Want to Do
Unless you have health or family issues that require you to retire early, it may be a good idea to wait until you know what you want your retirement to look like! Many people, who have no plan for what to do during retirement, become bored after they resign. You want to retire to something, rather than just retiring from something. Travel is fun, but it can get expensive and you may potentially run out of new interesting places to visit. Playing the same golf course three times a week may also eventually get old. Having a hobby that brings value to your life before retirement may help you navigate your retirement without getting bored. If you don't have such a pursuit and you still have good health, that may also serve as a sign to keep working for a while.
Can You Cut Your Hours?
If you merely want to cut back on the time that you spend in the workplace, you may be able to negotiate a flexible schedule as you begin to slow down. Of course, this will likely only work if you’ve been a great employee. If so, your firm may be willing to keep you around for a while and offer you the opportunity to work a part-time schedule to help mentor your replacement. Or, if you are still required to work a full-time schedule, perhaps you may be able to work from home a few days each week. If you have a more convenient work schedule, the additional income might make it worth sticking around for a few months, or even a few years!
Retirement and slowing down is a goal that almost everyone strives for. So how do you know when to start this new chapter in your life? That can be a tough question. I believe the first place to find the answer is to have a retirement plan based on what is important to you, your family, and your life. You have one shot at this, so speaking with a qualified financial planner is a great place to start! That is something that I know you should not delay!