How long do you need to work? Like just about everything else in financial planning, it’s a complex question.
While the average worker retires at 621, for you, that may be too early or too late. We can help answer that question by considering a few things:
- Do you have a pension plan through your current (or a former) employer? Oftentimes a pension plan will have something called a “normal retirement age,” and it’s often age 65. It may be possible to begin receiving the pension prior to that age, but it will usually come at the cost of a reduction in benefits.
- What about Social Security? The Social Security administration typically allows you to claim benefits between the ages of 62 and 70. The earlier you claim your benefits, the smaller the monthly income will be. You should factor in your health status, life expectancy, and need for income when deciding when to apply for benefits. The right financial advisor can help you calculate these numbers for a plan that’s specific to your financial needs.
- Is most of your savings in accounts like a 401(k) or Traditional IRA? The IRS has rules on when you’re allowed to take penalty-free withdrawals from these accounts. For example, if you’re younger than 59 ½, taking a withdrawal from your IRA may result in a 10% penalty.
So what age should you retire? 55? 59 ½? 62? 66? It depends on several factors, not limited to your life expectancy, amount you’ve saved for retirement, where you’ve saved your money (are there restrictions on when you can get your money out?), and what retirement is going to cost you. Working with a financial planner who has experience with people in your position can help alleviate any concerns you have about whether or not you can afford to retire on your own timeframe.
If you’re just starting the process and asking yourself these questions, consider downloading our Retirement Plan Checklist. In this document you’ll find two timelines: one based around how close you are to retiring, and the other, based around how old you are. Next, you’ll answer 30 questions to help you and your advisor have all of the bases covered when it comes to income, tax, asset, and risk planning in creating your plan.
Investment advisory services offered through Barber Financial Group, Inc., an SEC Registered Investment Adviser.
The views expressed represent the opinion of Barber Financial Group an SEC Registered Investment Advisor. Information provided is for illustrative purposes only and does not constitute investment, tax, or legal advice. Barber Financial Group does not accept any liability for the use of the information discussed. Consult with a qualified financial, legal, or tax professional prior to taking any action.