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How to decide when to retire: 8 questions to ask yourself

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8 mins

After you’ve had a bad day or week at work, deciding when to retire is simple at any age — as soon as possible. But the decision gets a bit more complicated as you realistically get closer to the retirement age you’ve targeted, whatever that may be.

Not only is there the financial element of having enough money to walk away from your job, but there are also the practical and psychological components that must be considered, such as where you’ll live, what you’ll do with your time, and the all-important issue of if you’ll be happy.

To help you make this significant decision concerning your readiness for retirement, here are eight questions to ask yourself.

1. Do I have a job or career?

If you still hit the ground running most mornings and look forward to digging into your work, you probably are still actively engaged in your career. However, if you have a knot in your stomach on Sunday nights before the week begins and you dread going to the office on Monday, you have a job.

Having a career and feeling satisfied with your work doesn’t mean you can’t retire, but it begs the question, “Why would you?” Your chronological age shouldn’t determine if you should walk away from your career if you still have gas in your tank and the desire to continue.

Hating what you do for a living doesn’t necessarily mean it’s time to retire. On the contrary, perhaps a new line of work will revitalize you and give you a second wind as you start a new path. It may be a shorter path for you, but it can still be very fulfilling.

[ Related: Career vs. job: What's the difference & which do you have? ]

2. What will I do when I retire?

The happiest retirees retire to something, not from something. They spend time mapping out their future. Whether it be traveling, spending more time with family, volunteering, learning how to sail, or just reading all the books you’ve wanted to read — ask yourself if you have a plan for how you’ll spend your days. If you’re unsure, you’re not ready yet.

3. Do I have enough money to retire?

If your knees are knocking as you ask yourself this question, you’re not alone. Most Americans live in that grey area of “I think so, but...” or “I hope so.” There is a slew of online calculators that can help you determine if you won’t outlive your money, as well as many qualified financial advisors that can help.

As we’re all well aware of in 2022, don’t forget to factor in inflation. If inflation returns to an average annual rate of 4% anytime soon, the amount of income you’ll need at age 83 will be double what you need at age 65.

[ Related: How much money should I have saved by 30, 40, 50 & 60? ]

4. How will I pay for health care & long-term care?

If you’re planning on retiring before you turn 65, you’ll need to buy individual health insurance or use COBRA for as long as possible after leaving your job. Both options are expensive and will probably cost you considerably more per month than you were spending on group health insurance (if you had it).

When you reach age 65, you’re eligible to enroll in Medicare. But, you’ll probably buy a supplement, have deductibles and co-pays, and be subject to the infamous Medicare “donut-hole.”

Long-term care must also be considered. Over 2/3 of adults will need some type of long-term care during their lifetime. A full-time home caregiver currently costs around $45,000 a year, and a semi-private room in a nursing home will set you back almost $100,000 annually.

[ Related: How does long-term care insurance work? ]

5. Will I be able to meet my financial obligations?

Before you turn in your retirement paperwork, put a pencil to paper and look at your budget. Are there items that won’t be going away anytime soon after you retire?

For example, are you supporting any adult children that will still need your financial aid? Paying alimony that won’t stop? Have years to go on your mortgage? Consider ways to reduce your debt if you need to. It may entail working a few more years while developing a side hustle that will supplement Social Security or weaning your kids off your checking account.

6. Where will I live?

This is the second biggest question people ask when considering retirement. Many retirees downsize when they retire. Some sell their single-family home and buy a condo in a 55+ community. Others take the cash from their sale and head to states with zero personal income tax, like Florida or Texas.

Keep in mind that states without an income tax have spiraling real estate prices because of the influx of retirees and transplants from states with high taxes and a higher cost of living, such as California and New York.

7. Can I maximize Social Security?

Social Security plays a major role in retirees' finances. The average retiree receives only 40% of their retirement income from Social Security because they can’t wait until they turn 70 to receive the maximum monthly payout. While you can begin collecting benefits at 62, even collecting before your full retirement age (between 66 and 67) means your benefits will be reduced.

If you can, wait until you’re 70 before drawing Social Security. You’ll collect another 8% for each year you wait after your full retirement age. This means if you defer taking payments from age 67 until age 70, your benefit will be 24% larger at age 70, which can make a substantial difference in your standard of living.

If you can’t wait until age 65 to retire, evaluate if your pension or 401(k) balance is large enough to sustain you until you start receiving your Social Security payout.

8. How does my spouse feel about me retiring?

While the decision is ultimately yours to make, if you’re married, how your spouse feels about this major life change needs to be considered.

Some spouses still working resent a spouse who retires and has the leisure time the working spouse wishes they had. Other non-working spouses relish their time alone and feel that having a retired spouse home during the day will infringe on their lifestyle.

While neither of these may be the case for you, sitting down with your spouse and discussing how your retirement will affect your marriage is a wise choice and could save you both from a lot of turmoil down the road.

Consider easing into retirement

Because companies need to retain experienced, productive employees, many employers offer employees the opportunity to work a reduced schedule before they retire. Perhaps cutting your hours back to 20-25 a week might help you test the retirement waters and see if you’re ready to jump in.

It may sound cheesy, but retirement is a journey — not a destination. Plan your journey carefully, and don’t rush into it. But when you leave the port, enjoy the sail you’ve set and the smooth waters ahead.

The information and content provided herein is for educational purposes only, and should not be considered legal, tax, investment, or financial advice, recommendation, or endorsement. Breeze does not guarantee the accuracy, completeness, reliability or usefulness of any testimonials, opinions, advice, product or service offers, or other information provided here by third parties. Individuals are encouraged to seek advice from their own tax or legal counsel.

— Published June 28, 2022
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