Retirement is one of the most significant life transitions we go through in life, along with marriage, having children, and for some, divorce.
The happiest retirees have started planning several years before their retirement date. Yet most people wait until the last minute or jump on a company offer for an early retirement package.
Here are some common questions and answers to help you with your retirement planning.
1. What age should I retire at?
Whether you’re looking to retire at 50 or 70, the strategies for determining the right time to retire usually depends on both personal preference and financial factors.
In the U.S., the median retirement age is 62 - the age at which you become eligible for Social Security retirement benefits.
Consider: is it a question of age or of finances?
If you consider yourself driven by your career, probably want to wait as long as you can. For others, it can not come soon enough - if you’re one of them, you might be interested in knowing that many 401k plans do not have penalties on withdrawals from age 55. That being said, consult with an experienced financial advisor to learn about the consequences this can have on delaying the start age for Social Security.
2. Is it the right time for me to retire?
It’s worth considering that you’re giving up the place you spend most of your time awake. To many, their career is a big part of their identity, and to even more, it’s their primary source of social interactions. Making the decision to retire is not one to be taken lightly.
Consider: is it a question of timing or of the job?
I would, therefore, encourage you to ask yourself if you would feel equally compelled to quit your job if you were working in a different work environment? In other words, are you actually deciding on whether you want to retire or change jobs? Take note of the difference and that something in between the two alternatives could work for you.
3. Can I afford to retire?
At this stage, it’s time to meet with a financial advisor or planner. Most people are at their peak in terms of earnings and income, and giving that up tends to come at a cost - in more ways than one.
Consider: opportunity costs, savings, and lifestyle changes
You will have to calculate how much you can withdraw from your retirement savings monthly for decades to come. And naturally, you’d want to have this question answered as accurately as possible.
There are many free resources available as well, such as at the Social Security Administration, who can also help you estimate your retirement benefits.
4. What will happen to my health insurance?
If you choose to retire at an age that does not yet qualify you for Medicare, it’s crucial to find out your options and costs for health insurance coverage. Even if you do, it’s best not to count on Medicare to cover all your medical expenses after your retirement.
Consider: public benefits and private services
Fidelity estimates that, on average, 15% annual expenses for retirees are health care related, including Medicare premiums. They further estimate the average 65 y.o. couple will need $285,000 to cover medical costs in retirement, without including long-term care.
Often you can find answers to these types of questions from your current employer. Set up a meeting with HR to get informed of post-retirement health insurance coverage and what this means for your transition.
5. What am I going to do once I retire?
Peace of mind goes beyond our financial planning. According to the National Council on Aging and the OECD, retired adults consistently rank purpose, health, and social connections as the most important factors to aging well. Don’t take for granted how you will spend your time in retirement.
Consider: Get in touch!
At Mon Tonton we strive to ease your transition into retirement, whatever that means to you. We connect you with opportunities to ensure your retirement is filled with activities, hobbies, social gatherings, and much more. If you want a partner in crime, we introduce you to just the right person to buddy up with from our members that we think you would match well with.
Reach out and let us know if you need help getting started.
Photo credit: Haley Phelps