Retiring Too Early: It Could Happen to You
While financial and health concerns are a major part of the retirement decision, it’s important to ask yourself questions that go far beyond financial preparedness to determine at what age retirement is right for you.
Americans are living longer than ever. At age 62, the current earliest eligibility age for receiving Social Security retirement benefits, life expectancy for the average man and woman is approximately 21.4 years and 23.8 years, respectively, according to the U.S. Social Security Administration.
“This means that many individuals will spend more years in retirement than they did in school,” the U.S. Social Security Administration says.
And that means retirement isn’t one something to take lightly, says El Dorado Hills, Calif.-based Scott Draper, a certified financial planner with Thrive Financial Planning.
Here are three questions to ask yourself when determining when it’s the right time for you to retire.
1. How will I spend my time?
“Even if you’re financially set to retire, you’re now going to have many years ahead — especially if you’re in your 50s or 60s,” Draper says. “What is this next stage in your life going to be about?”
Retirement is a great time to revisit old hobbies and dreams, says Kate Holmes, founder and principal at Las Vegas, Nevada-based Belmore Financial, LLC.
And some of those passions could even prove to become income generating activities in retirement, she says, noting that a growing number of people pursue new careers in retirement, or dedicate their time to volunteering.
“Retirement is often about moving on to something new,” Holmes says.
2. Will I benefit from delaying retirement?
Some soon-to-be retirees say they looking forward to crossing off items on their bucket list and assume doing so will occupy a great deal of time, but that’s not always the case, Draper says.
“Often people think they have a long list of what they want to accomplish in retirement, but then they find they’ve done it all in just two or three years,” he says, noting that some older Americans may benefit from delaying retirement.
In fact, those who delay retirement report higher states of well-being, according to the Gallup Healthways Well-Being Index.
That is, those who work in latter years report better emotional and physical health as well as overall healthy behaviors and life satisfaction, research shows.
“Regardless of your age, if you love what you do, keep at it,” Holmes says about deciding to delay retirement.
3. Can I afford to retire?
While taking a holistic approach that includes your emotional well-being is an important part of determining whether now is the right time for you to retire, there are important financial considerations to make before moving forward.
Financial planning will ensure you’re able to maximize your revenue streams in retirement to best support your expected lifestyle, Draper says.
“Do you have the monthly or annual cash flow that will support your lifestyle and that is going to be there the rest of your life?” he says. “In the initial stage of retirement, spending can increase because you’re getting rid of work-related expenses and going out more. Later your expenses might moderate and taper out as you become less active, but you might have increased health expenses.
In addition, retirement might also signal other changes, such as a move, that one needs to be financially prepared for, Holmes says.
“Will you need a new car or are you likely to move in the next few years?” she says.
Ultimately, seeking the input of expert when beginning to plan for retirement can help you make the most of your golden years, experts agree.
“There is a lot to consider,” Holmes says. “I recommend meeting with a certified financial planner to create a plan that works for you.”