When Are People Ready to Retire?
There is no simple answer to the above question. Many personal factors are involved and each individual is different. However, there are five key questions that people can ask themselves to make retirement decisions:
¨ Can I Afford It?- Take an inventory of retirement resources including Social Security, a defined benefit pension, an employer salary reduction plan (e.g., 401(k) plan), IRAs, tax-deferred annuities, other personal savings (e.g., taxable accounts), and other assets (e.g., rental property).
¨ Is This The Right Time?- Consider some of these key factors: ability to perform up to current job standards, the economics of working (e.g., Social Security earnings limit), early retirement incentives, and preferences for other ways to spend your time.
¨ How Will a Spouse or Family be Affected? Review the impact of a decision to retire on others. Key factors include an ability to share common activities with a spouse, a spouse’s retirement preferences, forgone salary, adequate financial benefits for a surviving spouse, and medical coverage for dependents.
¨ Do I Want to Retire?-Think about what you like about working and how central work is to your life. Then think about what you want to do next and how to smoothly transition to something else. Examples include a new job or small business, volunteer work, and spending more time with family and friends.
¨ When is It NOT a Good Time to Retire? Assess your finances and retirement plans honestly. Some signs that you might not be ready to retire are when you: have significant debt, have not obtained information about future Social Security benefits, have not prepared a later life budget, have a gap between an employer health insurance plan and Medicare, and have not made plans about what to do all day after you leave work.