Timing Your Retirement

“When is the best time to retire?”

That’s the golden question. Whether you are an ambitious young professional looking to get ahead of the game or you have been working for over 30 years and you’re ready to transition into retirement, everybody wants to know what that magic number is. There are those common ages people like to throw out, such as 62 or 65, but you may find yourself confused when you don’t have a solid answer. If you’re planning out your retirement and find yourself in that grey area, here are some facts that may help make this decision a little easier.

There may not a “best age”

Many people claim that 62 is the age to retire because that is the time when Social Security kicks in, but that may not necessarily be the case anymore. According to the Social Security Administration, “there is not a “best age” for everyone and it’s your choice.” If you are planning to retire at 62 or earlier, there are some factors that you should consider:

  1. The “full age” of retirement, according to the Social Security Administration, is 66 years. What this means is that if you hold off until then, you will get a larger monthly benefit than if you began collecting at 62.
  2. Medicare insurance coverage does not begin until you are 65, so you’ll want to make sure you have a plan for medical expenses if you choose to retire at an earlier age.
  3. If you reach the full retirement age and still want to work you can do so while receiving full Social Security benefits.
  4. If you are married, you have two people you must plan for. Depending on your ages, this can affect how and when you collect your benefits.
  5. Retirement may be longer than you initially anticipate. People are living a lot longer than previous generations, so you may need to make your money last a lot longer than you think.

Along with these factors, it is important for you to know the pros and cons for different retirement ages. By learning about them, you may have a clearer understanding which could help you pick the right age.

Pro and Cons of Each “Retirement” Age

When it comes to picking an age, there are a few numbers that are often stated as the “goal age”. These numbers range from 50 to more recently 70. Each age shares its own advantages and disadvantages, so it’s important to know both so that you can find the right age for your situation.

50s – Some people strive to retire in the 50’s, but there are many issues that may arise when doing so. One of the main issues is that most people who retire around this time either live on very little or inherited a sufficient amount of money. It may be feasible to retire at this time because of a special rule in most 401(k) plans that allow penalty free withdrawals, but this is only after your 55th birthday. If you are considering retiring during this time, you need to remember that Medicare does not begin until you are 65, so you’ll need to have enough funds to cover up to 15 years of medical expenses.

60s – The 60s are a more common age range to begin retirement than the 50s because this is when you become eligible to receive financial benefits. The earliest you can receive benefits like Social Security is at 62, which is why that is the average age of most retirees. Another benefit that you may be eligible for at this age is a reverse mortgage loan. With a reverse mortgage, you can defer the growth of your other assets with the proceeds you receive from this loan. You can also use this money to help pay off expenses such as health care bills and home repairs. What makes a reverse mortgage especially convenient is the loan balance does not need to be repaid until the loan comes due. Just make sure to pay your property taxes, homeowners insurance, and maintenance expenses to avoid foreclosure.

70s – If you retire in your 70s, you will receive the maximum amount of Social Security benefits. On top of this, a reverse mortgage loan may be favorable for you financially. Something you need to remember if you do plan on retiring at this age is that you need to plan your IRA withdrawals by the time you are 70 and a half years old or you will face a heavy penalty.

Planning out your retirement can be tricky when you don’t know when the best time to retire is. Although many people think of a specific age, the reality is that you can retire whenever you feel ready to. So, whether you stop working as soon as you turn 62 or hold off for a while, you want to make sure that you have a plan set so that you can spend your retirement the way you want.