When can I retire?

“When can I retire?”

Hopefully you love your job, and the question “when can I retire,” is something that pops into your head only occasionally. Possibly, you may ask yourself this question more regularly, even daily. In either case, the answer might be based on a certain chronological age, or health concern, or it might be based on reaching a certain dollar amount in net worth.

Are you planning on retiring when you hit, say, 65? Or do you plan on retiring with 2 million dollars in assets?

At Towerpoint Wealth, we help our clients remove the hassle of properly coordinating all of their financial affairs, so they can live happier lives and enjoy retirement. In our article, “Is $2 Million Enough to Retire? 5 Steps to Retiring with $2 Million,” we briefly discuss the myriad of moving parts involved in answering the question, “when can I retire,” and focus on getting to a specific investment goal.

In this article, we’ll focus on some different financial complexities you should be considering when thinking about when retirement can happen for you.

How much money you will need for a comfortable retirement depends on a number of factors that only you can define. Let’s start with what the subjective concepts of “comfortable” and “retirement” even mean! We’ve learned in our conversations with clients that different people define these two terms very differently.

“When Can I Retire?” | Consider Lifestyle in Retirement

For some people, frugality is part and parcel of who they are; a frugal lifestyle is practiced in their day-to-day life during working years, and they have no plans to change once the steady paycheck stops rolling in. For other people, they enjoy a fancier lifestyle, and when they imagine retirement, it’s full of cruises, sportscars, or big RVs!

We’ve known people whose idea of retirement is not to stop working at all, but instead to shift gears into something they’re more passionate about, or something they can professionally do on their time and on their schedule. (Like one woman who retired from her office job and is now an usher at home games for her favorite baseball team!)

To make sure you won’t run out of money, it’s important to have a realistic understanding of your monthly expenses while you’re still working. Once you know that, create a post-retirement budget. You’ll still have income, but it probably will look very different—distributions from investment accounts, pensions, savings, and Social Security. And if you’re like our baseball fan friend above, perhaps also a little “extra” pocket money from a part time gig.

Consider Health and Age Expectancy

It might seem morbid, but considering your life expectancy, based on your health and family history, is a factor that should definitely come into play when considering how and when to retire. Consider that, for some people, the question might be flipped: Instead of asking when can I retire, health or caregiving responsibilities might have them asking “how long can I work”? If you’re asking the former rather than the latter, we believe you’re in the better position.

Obviously, the longer your retirement, aka the longer you live, the longer the nest egg of money you have accumulated must last. This speaks to how much money you need before you retire, but also to your portfolio asset allocation. The right mix of stocks, bonds and other investments, as well as relatively liquid, relatively stable investments like CDs and money market accounts, is crucial to add insulation to your portfolio, because downturns or losses are felt more severely when in retirement.

Sadly, the cost of health care and health insurance also comes into play with retirement. Healthcare costs can spike as you age.

Consider Maximizing Social Security and Pension Benefits

Oftentimes, the key to unlocking the most income from these benefits is to delay taking them, or at a minimum to strategize around the payout options that are available to you. The Social Security website has a tool to calculate your estimated payment if you retire at different times between age 62 and 70, when your payment maxes out. If you claim benefits early, which can be 62 for Social Security and as young as 55 with a pension, you may end up with less money from these accounts to live on each month.

If you’re ready to leave your current position, but believe you can find new work you like that covers a decent portion of your expenses, you can possibly delay Social Security because you won’t need it. If you take Social Security and then continue to work, your benefit payment may be temporarily reduced. After “Full Retirement Age,” which is somewhere between age 66 and 67, if you work and earn, your benefit won’t be affected.

It’s a lot to think about. But if the daily grind is getting you down, or you just have a lot of things on your bucket list and are afraid time is getting pinched, considering “When can I retire?” might be the best thing you’ve ever done for yourself.

Watch our YouTube “Is $2 million enough to retire”

Our President, Joseph Eschleman, CIMA® worked with the team to put together a video reviewing what everyone should think about when they think about retirement and five steps to help folks get there.

Check out more YouTube videos

For more information on when to take Social Security benefits and how to reduce income tax as part of your retirement plan.

How Can We Help?

At Towerpoint Wealth, we are a fiduciary to you, and embrace the legal obligation we have to work 100% in your best interests. We are here to serve you and will work with you to formulate a comprehensive and tax efficient retirement strategy. If you would like to discuss further, we encourage you to call, Joseph Eschleman, 916-405-9150, or email jeschleman@towerpointwealth.com to open an objective dialogue.