How do you know when it's time to start a new chapter in your life?
Factors to Consider to Determine the Best Retirement Age for You
by Gary Foreman
Medicaid Guidelines for Home Care
Do You Need a Financial Advisor in Retirement?
When Should I Start Taking Social Security?
Your Strengths Don't Retire When You Do
According to the federal government, your "full retirement age" can be anywhere between 65 and 67, depending on when you were born. And, if you choose, you can begin taking Social Security at a reduced level when you're 62. The IRS says that you can begin taking money from your IRA without penalty when you're 59 1/2. Your company's pension plan may have yet another year in mind. So what factors should you consider to determine the best retirement age?
Your body may be telling you it's time to retire. Your brokerage statement might be telling you that it's not the best time to retire. Your spouse might have even a different opinion. To help us put the retirement question into perspective, we reached out to Kimberly Howard, CFP(r) and owner of KJHFinancialServices.com. We wanted to find out what factors she thought were important in deciding when to retire.
Q: Having sufficient income is important to most retirees. Is there a way to estimate how much income will be needed?
Ms. Howard: Income needed for retirement depends on your expenses during retirement. For most newly retirees, their expenses increase. Mostly due to wanting to do all the things they have been putting off during work years. After a couple of years, expenses drop to around 80% of working years. The catch is medical expenses have outpaced those reduced working years expenses.
Q: What role does the existence of debt play in determining the best retirement age?
Ms. Howard: Having debt during retirement causes additional stress. Credit card debt can derail planning retirement. Home mortgage stress usually outweighs the income tax deduction received.
Q: Lately you hear people speaking of a "phased retirement." What does that mean and how does it work for people?
Ms. Howard: More and more people are "phasing in" their retirement. They usually quit their full-time jobs and work part-time. This allows them more time, while providing income plus structure and purpose.
Q: Many who are considering retirement are caregivers for their grandchildren or elderly parents. How does this play into the decision of choosing a retirement age?
Ms. Howard: Being a caregiver can be a full-time job. Many do not realize they need some time for themselves.
Q: Some people fall into retirement when they lose a job a few years before they were planning on retiring. Is that acceptable? Or are there factors they should consider before making that retirement choice?
Ms. Howard: Having a balance between income and expenses is the top priority when determining when to start retirement.
Q: Different programs have different retirement ages. IRAs, pensions, Social Security, Medicare, etc. all have different age thresholds. How can someone contemplating retirement integrate all these various programs?
Ms. Howard: Having a retirement plan is crucial. Retirement program eligibility dates vary. Most allow you a one-time selection process. Selecting correctly could set you up for a successful retirement.
Gary Foreman is a former financial planner and purchasing manager who founded The Dollar Stretcher.com website and newsletters in 1996. He's been featured in MSN Money, Yahoo Finance, Fox Business, The Nightly Business Report, US News Money and CreditCards.com. Gary shares his philosophy of money here. You can follow Gary on Twitter or visit Gary Foreman on Google+. Gary is also available for audio, video or print interviews. For more info see his media page.
Take the Next Step:
- If you're considering retirement do you know When You Should Start Taking Social Security?
- Visit the TDS library for more on retirement planning for the nearly retired.
- What to do when your savings don't match your retirement goals?
- Part-time jobs for retirees.
- Should you re-evaluate your insurance needs as you approach retirement? Here's what you need to know about your changing insurance needs.
Share your thoughts about this article with the editor.
Debt is preventing me from saving as much for retirement as I should be! Tell us: Yes, debt is hindering my ability to save for retirement and I could use help dealing with it! or No, debt is not a problem but I'd love to discover more ways to save as I head into retirement!
Baby Boomer Tools & Resources
- A tool to determine the best time to take Social Security benefits
- Get out of debt before you retire
- Get free answers to financial questions
- Get free answers to legal questions
- Retirement shortfall calculator
- Life expectancy calculator
- IRA required minimum distribution calculator
- More retirement planning calculators
Trending in Baby Boomers
- Investing retirement money that you may never need
- Financial tips when nearing retirement
- Why pay off your mortgage with a reverse mortgage loan?
- 3 ways retirees can tap into their home equity
- Financial advice for women in their 50s
- Including real estate in your retirement plan
- Frugal ways to beat the winter blahs
- This week's Readers' Tips