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Should I Retire Early?


Retiring from an active working life requires careful consideration to ensure that prior planning and saving strategies will help position you for a financially independent life in the future. For Social Security purposes, full retirement age is 66 years and two months, increasing to age 67 for those born in 1960 or later. In addition, the earliest retirement age from which you can begin to receive partial Social Security benefits is age 62. If you decide to delay receiving Social Security benefits until you reach age 70, you can receive a delayed retirement credit of up to 8 percent.

If you are thinking about retiring early, not only should consideration be given to receiving partial Social Security benefits, but you should also consider whether or not you are actually ready to retire.

Run Out of Money

Regardless of your age at retirement, the money you will need after you retire will be dependent on life expectancy, insurance coverage, anticipated healthcare costs, inflation, and other expenses. Many folks underestimate their life expectancy and still others will retire without any savings. Failure to save enough money for retirement or thinking you may not live for very long may result in running out of money or experiencing a less than satisfactory retirement. As such, provided you are healthy enough to continue working until you reach Social Security retirement age, you should work to maximize investments in individual or employer-sponsored retirement plans while you are still working, and then plan to draw full Social Security retirement benefits when you reach retirement age. This consideration coupled with a clear expectation of your retirement spending rate will allow you to determine how much money you need to save to enjoy a comfortable retirement.

Regrets in Retirement

Retirement regrets include failing to accept a slower pace and hoping for long-term employment. It’s important to plan how you will use your time, understanding there may be changes to your social interactions, especially if you stop working before your co-workers or others in your work network. If the option is available to you, gradually transitioning from full-time employment to part-time retirement can enable you to realize the slower pace in life and enable you to gauge how that will impact the way you feel. However, even the strongest of retirement plans can be derailed by unexpected health conditions, and you may find yourself unable to work up to full retirement age. Not only could this early departure from the workforce lower the amount you are able to save for retirement, but your retirement plans themselves may also change. Retirement without a roadmap may leave you feeling unfilled and isolated. Therefore, set retirement goals, consider part-time employment or volunteerism if these options are available to you, and take action now to prepare your mind and your finances for your retirement years.

Unrealistic Retirement Lifestyle

Lifestyle goals in retirement that are realistic and achievable will go far in boosting your retirement confidence. While some of your expenses will change when you retire, expect expenses to be 70-80% of what they were before you retire. If basic living expenses like housing, food, and utilities are 50% or more of pre-retirement income, expect these same expenses to be 50% or more of what you will need to spend in retirement to benefit from the same lifestyle. Additionally, non-discretionary health and other long-term care costs may be your biggest retirement expense. Your healthcare needs will vary by age, and future healthcare costs could rise at the same rate or even higher than inflation.

The best age for you to retire will ultimately depend on your personal financial situation, your health, your family needs, and your goals in retirement. Transitioning from saving money to living off of your savings is a major challenge for many retirees. Therefore, take steps now to manage your finances well in your working years so that you can realize the lifestyle you want in your retirement years.

Personal – Saving, Planning & Budgeting

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This article contains general information only. Sunflower Bank is not, by means of this article, rendering accounting, financial, investment, legal, tax, or other professional advice or services. This article is not a substitute for such professional advice or services, before making any decisions related to these matters, you should consult a qualified professional advisor.