There are a lot of variables to take into account when trying to figure out the best time to retire. There’s even more to take into account than just how much money you have saved and your age. In Liz Weston’s MSN Money article, “How to tell if it’s time to retire,” financial expert Weston gives readers five specific things to consider before making the decision to retire. There are many people who have lost their jobs without having the luxury of deciding when to retire, whether they were laid off due to the tough financial times or forced to quit because of an unexpected illness.
Some companies give big reasons for people to retire sooner than they had planned. My mother-in-law was offered quite a nice buyout from her job to entice her to retire and she took the bait. So far, she’s very glad she did. Others are offered financial incentives, better benefits, or other enticing things to retire early. In that case retirement before you had planned may be your best decision. But it is still a good idea to go over these five questions and make sure you are truly ready.
Can you actually afford to retire? Make sure that you have used some type of retirement calculator to see how long you are likely to live so you can make an educated guess about how much money you’ll need. This is where annuity products come in handy as well. By using a portion of your retirement savings to buy an annuity, you can guarantee that some of the income you have coming in yearly will last for the rest of your life. Weston recommends speaking with a fee-only financial planner to make sure you are on the right track for your retirement financing.
One of your biggest expenses as you age will be for health care. Make sure that your health care is lined up before you leave your job. Extending your employer insurance through COBRA is an expensive option, but if you don’t yet qualify for Medicare, you’ll need to research other options. Some people have coverage through a spouse, while others have to seek individual health insurance policies until they are of Medicare age. It’s also important to ask yourself what you will do next. Weston points out that people who have a passion for a hobby, cause, or second career are most satisfied in retirement.
Asking those people with whom you are closest what they think about you retiring is not something I had really considered. But it absolutely makes sense. Friends and family can give an often unbiased opinion about whether they think it is the right time for you to retire, or if something temporary is making you stressed about your job. The last question to ask yourself is if you should try something else first before retiring. If you are not yet 60, Weston says that the benefit in working a few more years multiplies exponentially with every added year. You might consider working part-time even for a few years or changing your lifestyle to get accustomed to how you financially survive during retirement. Whatever decision you make about your retirement, make sure you have asked yourself these questions and know that you are prepared to fund the rest of your life.
Written by Rachel Summit
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