Answering the big question: When should I retire?
This critical decision, along with other important retirement decisions, have been addressed by a landmark effort from the Society of Actuaries (SOA) to examine the major decisions you'll encounter when planning your retirement. SOA just released its Managing Retirement Decisions series of online briefs; each focuses on specific decisions that you'll face before and during your retirement years.
The first in the series addresses the big question -- when should you retire? -- by reviewing issues you need to consider before you make that decision.
The brief begins by pointing out a common tendency in our culture: The media often portrays retirement as an extended vacation -- your chance to fulfill every need, dream and passion. And often, an insignificant event at work can trigger an "I'm outta here" retirement, one that happens before you've had a chance to do the necessary planning to see if retirement at that point is even feasible.
To decide when you're really ready to retire, you should first determine the answers to a number of related questions:
-- Should my spouse and I start Social Security as early as possible, or should we delay taking benefits to receive higher payments later on?
-- Do I have a pension, and how much will the monthly retirement income be?
-- How will I generate reliable, lifetime income from my 401(k), IRA and other retirement savings, and how much will this income be?
-- Will the income from the above sources cover my expected living expenses?
-- How will I obtain medical insurance?
The last question often drives many people's retirement decisions; they delay retirement until they're eligible for Medicare at age 65.
Digging deeper, you might also ask yourself:
-- What will be the impact of delaying retirement by one year? Two years?
-- Have I identified activities, hobbies and interests that I want to pursue in retirement?
-- Is my spouse retired? Do we have dreams we wish to pursue together?
-- Should I work part time in my retirement years to help make ends meet and have meaning and purpose in life?
Click on the link to the Managing Retirement Decisions brief for more detail -- it lists additional questions you should answer and provides real-life examples of how two people decided when to retire.
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There's no right answer for everyone to the "when should you retire" question; you should consider your unique circumstances, needs and goals. Furthermore, there are good reasons to consider a phased retirement, where you work part time for several years. But while there's no one right answer for everyone, there certainly are some wrong answers to the when-to-retire question:
-- You decide to retire at the age you're "supposed" to retire according to someone else's expectations.
-- You decide to retire at the age when friends and family members retired.
-- You decide to retire before retirement is financially feasible for you.
Don't retire with a "keep up with the Joneses" mentality. Instead, do the necessary homework to make sure the numbers work out for you. You'll feel better about your future if you do.
Stay tuned for future posts that examine more briefs from the Managing Retirement Decisions series.
Steve Vernon
View all articles by Steve Vernon on CBS MoneyWatch»
Steve Vernon helped large employers design and manage their retirement programs for more than 35 years as a consulting actuary. Now he's a research scholar for the Stanford Center on Longevity, where he helps collect, direct and disseminate research that will improve the financial security of seniors. He's also president of Rest-of-Life Communications, delivers retirement planning workshops
and authored Retirement Game-Changers: Strategies for a Healthy, Financially Secure and Fulfilling Long Life and Money for Life: Turn Your IRA and 401(k) Into a Lifetime Retirement Paycheck.
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