Deciding when to retire is a major event in most people’s lives. There are all sorts of questions related to when should I retire that is can become a giant jigsaw puzzle that has a hundred different solutions.
You have to determine whether or not you have enough money to retire by estimating how much money you are going to spend in retirement. Then, you have to consider all income sources that will be providing you with income after you retire.
If the numbers add up in a way that makes you feel like you could live comfortably without working, then you have your answer. If, however, they do not add up in the way you want, you have more work to do before you can complete your puzzle.
There are many retirement calculators available online that can help you determine how much money you need to have access to in order to retire at a specific age. These are helpful to an extent, but there are other factors that go into deciding whether or not to leave the workforce. Some of those factors are listed here.
Being Realistic About When Should I Retire:
Chances are you probably can’t retire tomorrow or even next year if you haven’t already spent time developing your plan for financial independence. Unless you are independently wealthy, it’s going to take some time to get your money in order to help finance your retirement. Even if you’ve waited until you’re are in your 30’s to start saving for retirement, you still should put forth an honest effort to try (read my tips on how). The bottom line is that you should never quit working unless you have enough money in the bank to pay all of your obligations for at least six months, and that’s if you plan to get another job.
If you don’t plan to get another job and you are younger than 59 1/2, then you need to make sure you don’t quit your job until you know you have enough money to keep you afloat until you can take withdrawals from your retirement accounts without incurring a penalty. The IRS assesses a 10 percent penalty on all funds taken out of a retirement account (401k or IRA) before the age of 59 1/2. You do not want to lose that 10 percent , so having enough money to live on until then is critical.
If you are already 59 1/2 years old or older, then you might be able to retire soon. It just depends on how much money you will be receiving from your account and how much your expenses are. It is important for you to be realistic when estimating your expenses. You don’t want to underestimate them just so you can justify retirement. In fact, overestimating them is a far better strategy, since having more money than not enough is clearly a better option.
To help you estimate your retirement expenses, write down all of your current expenses and think about how they might change when you retire. For example, you might be paying $400 in gas every month because you have a long commute. You probably won’t need that much gas when you retire because you won’t be traveling every day to your job. In addition, you might no longer have a house payment if you have been paying on a 15- or 30-year mortgage for a long time. However, you healthcare costs are probably going to go up as you get older, so budgeting more money in this category would be wise.
Know Your Income Sources:
You can’t very well estimate how much money you are going to have in retirement if you don’t know where your income is going to come from. That’s why it will be important to know what retirement income sources are available to you.
For example, you will likely qualify for Social Security when you reach 65, but other than that, your income streams are really up to you. Do you have a pension through your employer? How much will that give you each month? Do you have a 401k? How much money is in that account?
What about your personal savings account? How long could you live comfortably on just that money alone? This is an important consideration if you are thinking about retiring early, before you qualify for Social Security and before you can take withdrawals from your retirement accounts without penalty. You should also think about other sources of income, including loan repayments (if you’ve loaned money to others), passive income through annuities and other investments and life insurance policies that have cash value.
Do You Even Want to Retire?
Regardless of the amount of money you have that is available to fund your retirement, you still might not be psychologically ready to ask “When Can I Retire?” This is an assessment that only you can make because you are the one who is thinking about leaving the workforce. For example, some people think about retiring because they hate their job and cannot imagine working it for another year. Others are under so much stress at work that they need to get out before they go crazy.
However, these might not be indications that it is time to retire. You might just need a change. These days, people are changing careers at all phases of life. You are not bound to one field just because you are older. You can still start a new career, even without getting more education. However, if you decide to pursue additional education, there are many opportunities out there for non-traditional students. You can even earn a degree right in your own living room!
Determining whether or not you truly want to retire is almost as important as analyzing the financial costs of retirement. You can get help with that decision here. Who knows? If you find a new career path that is both enjoyable and fulfilling, you might not even need and answer to when should I retire for a few more years.
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