Are you ready to retire?
Here are some questions to ask yourself when deciding whether or not you are ready to retire.
Is your nest egg adequate?
It may be obvious, but the earlier you retire, the less
time you'll have to save, and the more years
you'll be living off your retirement savings. The average American can expect to live past
age 78.* With future medical advances
likely, it's not unreasonable to assume that life
expectancy will continue to increase. Is your
nest egg large enough to fund 20 or more
years of retirement?
When will you begin receiving Social Security benefits?
You can receive Social Security
retirement benefits as early as age 62. However, your benefit may be 25% to 30%
less than if you waited until full retirement age
(66 to 67, depending on the year you were
How will retirement affect your IRAs and employer retirement plans?
The longer you delay retirement, the longer
you can build up tax-deferred funds in
traditional IRAs and potentially tax-free funds in Roth IRAs. Remember that you need taxable compensation to contribute to an IRA.
You'll also have a longer period of time to contribute to employer-sponsored plans like 401(k)s — and to receive any employer match or other contributions. (If you retire early, you may forfeit any employer contributions
in which you're not fully vested.)
Will you need health insurance?
Keep in mind that Medicare generally doesn't
start until you're 65. Does your employer provide
post-retirement medical benefits? Are
you eligible for the coverage if you retire
early? If not, you may have to look into
COBRA or an individual policy from a private insurer or the health insurance marketplace — which
could be an expensive proposition.
Is phasing into retirement right for you?
Retirement need not be an all-or-nothing affair.
If you're not quite ready, financially or
psychologically, for full retirement, consider
downshifting from full-time to part-time employment.
This will allow you to retain a
source of income and remain active and
*NCHS Data Brief, Number 267, December 2016