Retirement AgeAugust 3, 2018 11:47 am
What Is Your Retirement Age?
The day to day of work and family sometimes takes over and before we know it we’re creeping up on retirement and realize we’ve paid little attention to how our retirement will look and be funded, and what our exact retirement age will be.
Are You Ready for That Next Milestone?
What age do you want to retire? Have you sat down and really thought about your retirement. What does it look like? Is it pretty low-key, downsizing, relaxing at home or are you picturing going on vacations and spending winters where it’s sunny and warm? Whatever future you see, it’s important to make sure your needs are met.
What’s Your Retirement Age?
Dreaming for early retirement is common but are you doing what is necessary to secure your life financially?
When asking Americans, what is the ideal age to retire, bankrate.com found that 61 is the average ideal age. The breakdown by age group is as follows:
- Millennials (18-37) | 61 Retirement Age
- Gen Xers (38-53) | 60 Retirement Age
- Baby Boomers (54-72) | 62 Retirement Age
- Silent Generation (73+) | 65 Retirement Age
According to Maurie Backman, “A large chunk of working adults are way behind on retirement savings. An estimated 42 percent have less than $10,000 set aside for the future, and unless they manage to ramp up, retiring at 61 will pretty much be out of the question.”
Money is a big consideration and concern for retirement but many people eagerly head into retirement but don’t think about how that lifestyle change is really going to look. Many people say they don’t want to retire and feel useless. Some professionals consider consulting or finding other revenue sources to help generate income. Having the funds to retire comfortably is just as important as:
- Finding purpose for yourself and your life beyond work
- Rediscovering yourself and your passions and hobbies
- Learning to manage your lifestyle with a different income source
This is easier for some than others. It’s a new way of life that you need to enjoy and embrace. Thinking about what that looks like for you ahead of time will help you be happy and ready for your retirement.
How Ready are you to Retire?
This is a list of things you should be thinking about before retiring that was released by US News.
- Healthcare: Now that your employer isn’t telling you what options in healthcare you have and what they are contributing you have to research and determine what is going to work for you and you can afford. Don’t forget to leave room for unexpected costs that can occur as well.
- Housing: Are you downsizing, renting or relocating? Your housing needs can change over the years of your retirement so think about how those different scenarios can play out.
- Spending: How much do you expect to spend annually?
- Retirement Savings: Based on your estimated annual spending, check and make sure that your retirement savings goal is enough to live on for the rest of your life.
- Income Sources: Identify and calculate the amount of money you will receive from your various income sources. This will give you a better estimate on what you need to save.
- Continued Work: Is this something that you are planning for? This can improve your retirement cash flow.
- Draw Down Strategy: Figure out which types of accounts you should draw from first. Don’t forget about taxes with some accounts.
- Maintaining Health: Promoting good health is important for keeping health care costs down.
- Activities: Now that you aren’t working you need to consider what added hobbies and interests will add to your budget.
- Stuff: People tend to accumulate a lot of stuff, start to declutter and remove things from your home that you won’t need when you retire.
- Travel: This is a top to-do among most retirees. Prioritize your travel destinations.
- Estate Plan: Review your estate plan at least every five years.
- Loss of a Spouse: This is not something most people like to talk about but it’s an important step. Discuss with your partner about what you’d do in the event of one of you passing.
- Long-term Care: As the longevity of our lives increases we need to plan for potential long-term care needs.
- Legacy: Thinking back about your life and the impact you had on your family, friends and community.
With retirement there is a lot to think about but if you think and plan you’ll be ready before you know it.
Key Facts to Know About Your Social Security
While Social Security is set up to help fund your retirement it is not good to have all your eggs in this basket if you want to have a healthy retirement. Today, many retirees are finding that Social Security alone will not fund their ideal lifestyle.
Social Security has changed over the years and depending on when you were born your age to collect may be different than your siblings or friends. The reason for these changes in full retirement age is based on life expectancy. Your retirement age determined by the Social Security Administration and is based on the year you were born.
As long as you wait until your full retirement age to take your Social Security, you'll get the full benefit payments you're entitled to collect. There are variables that can allow you to take advantage of your benefits sooner or if you choose, later.
Your Social Security benefit payments are based on an average of your top 35 years of earnings. You have the power to raise or lower that benefit amount depending on the age at which you first claim Social Security.
Retire and Collect Younger: Less Money in Your Pocket
The earliest age that you can collect Social Security is 62. However, claiming your benefits early comes at a cost. If you decide to take your benefits before your full retirement age you will lose 6.67% of your full benefit amount for up to three years and then you will lose 5% per year after that. What that amounts to is a reduction in payments by 25% if you full retirement age is 66 and you claim your benefits at 62.
Retire After Your Full Retirement Age: Increase Your Payments
The other side is to retire after your full retirement age. This option allows you to raise your benefits up 8% each year until the age of 70. At 70 the incentive to hold off runs out. For example, you can increase your payments by 32% if your full retirement age is 66 and you wait until you are 70 to collect your Social Security.
What Path is Right for You?
Determining the right option for you is never an easy task. It’s important to keep in mind that whatever benefit amount you first lock in will be the payment amount you receive for life. You can not change your mind down the road.
There are multiple things that come into consideration when deciding if you should take your Social Security before, at, or after your full retirement age.
- Do you have other investments, assets or avenues of income?
- What debt do you have?
- Are you planning on downsizing?
- Do you need funds for hobbies, traveling, etc.?
To help you weed through the difficult questions and find out if you have the funds needed to live a secure and fulfilling retirement as you dreamed take a minute to complete our Retirement Calculator. By answering a few questions: current age, age you wish to retire and an estimate of how much you’ll need monthly to sustain your lifestyle, we can help strategize what needs to be done to get there.
Do I Invest or Work Longer?
Both. Planning ahead will give you the most security in retirement. By putting money aside, investing and planning years (or decades) in advance you are setting yourself up for a better and more secure retirement.
Working longer is a great idea, especially if you love what you do. However, that is not a secure option that you can depend on. Working until you’re 70 will most likely give you the funds you need to retire on according to a report from Boston College. While that sounds promising it ignores that fact that unemployment rates for those over 50 years of age are growing faster than any other group and older workers are at a higher risk of facing long-term unemployment. In addition, if they do get re-hired it’s not without taking a substantial pay cut. In most cases it’s at least a 25 percent cut in wages.
We understand that this paints a dim picture but it doesn’t have to be. Take some time to read and learn more about what retirement planning looks like with our complimentary download of the Sunny Side Up. This digital book will give you insight into the way you think about your money - how you spend, save and invest.
Be Ready for Retirement
After your done reading we encourage you to set up your complimentary appointment or give us a call at (847) 680-9050. Not every situation is the same. Everyone is headed towards retirement at a different rate. Your age, investments, assets, retirement goals are different from your neighbors or friends. It’s best to sit down and strategize with a financial adviser to make sure that you have a secure path for your future.