One of the biggest financial and lifestyle decisions that individuals and couples face is deciding when to retire.
Though some people are forced into retirement either because of employment changes or health problems, the choice for many others is made at their own discretion.
The Society of Actuaries published a list of key questions to ask when considering when to retire. These questions include:
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Do I have enough money? Salaries will be replaced by Social Security benefits, annuity and/or pension benefits and savings withdrawals. While some expenses and outlays will go away (Social Security contributions, work-related costs, retirement savings contributions, etc.), new costs could appear (e.g., travel, hobbies, etc.).
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What’s the impact of working one or two more years? Postponing retirement allows a person to delay claiming Social Security, thereby increasing the size of the annual benefit. It also gives retirement savings more time to grow. Pension benefits usually also increase up to age 65, though some plans may boost benefits until age 70.
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When should I claim Social Security? Postponing claiming Social Security benefits from age 62 until age 70 increases the size of the benefit by about 75%. Delaying impacts not only the benefit at the time of claiming, but also the survivor benefit for married couples. The Society of Actuaries says nearly half of widows have no other income than Social Security.
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When is my spouse planning to retire? A spouse with a shorter work history (e.g., 20 or 25 years) can realize a bigger increase in Social Security benefits by working three extra years than a spouse with a 40-year work history. Spouses also need to determine where they will live and what type of activities they will engage in once retired. They will also need to assess the feasibility of their goals.
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Where will I get health insurance? Medicare is available at age 65. Those eligible for Medicare can opt for Medicare Advantage plans or a supplemental insurance (Medigap). Those considering retirement before the age of 65 may be able to obtain insurance through their employers or through health insurance exchanges.
Source: “Big Question: When Should I Retire?,” Society of Actuaries, May 2017.
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