Thinking about retiring? For many workers, retirement is the ultimate financial goal. It’s when you get to leave the working world and live life on your terms. However, the timing is important. Retire too early, and you risk running out of money. Retire too late, and you may lose out on valuable years that you could spend enjoying yourself.
There’s no magic formula for determining the right time to retire. Finances should be an important consideration. So, too, should your health and happiness. You also may need to consider family obligations or perhaps other dreams you may want to pursue after you leave the working world.
Not sure if you’re ready? Below are a few questions to ask yourself as you make your decision. If you don’t know the answers to these questions, you may need to do some more planning. A financial professional can help you develop your strategy and solidify your retirement plans.
What will you do with your free time?
You’ve probably been looking forward to retirement for years, but have you given thought to how you’ll spend your free time? Many retirees initially enjoy their freedom but soon grow frustrated or bored. Some even suffer from depression or anxiety because they feel like they no longer have purpose.
Boredom can have financial consequences. You may choose to fill your free time with costly activities like shopping, travel and dining out. The risk is that you spend too much in the early years of retirement.
If you don’t know how you’ll spend your time in retirement, now may be the time to think about your options. It’s often helpful to write about your ideal day in retirement. How would you spend your time? What activities are most important to you? Think of ways you can enjoy retirement without excessive spending.
When should you file for Social Security?
Social Security is likely to play an important role in your financial picture. It’s one of the few retirement income sources that’s guaranteed* for life, so it can provide much-needed financial stability.
Your benefit amount is largely dependent on when you file. You can file as early as age 62. If you file before your full retirement age (FRA), however, your benefit could be reduced as much as 35 percent.1
On the other hand, if you file after your FRA, you could increase your benefit. Social Security offers an 8 percent annual benefit increase for each year past your FRA that you wait to take benefits. If you can afford to delay your benefits, this could be a way to increase your retirement income.2
There’s no universal right answer on when to file for Social Security. Your decision should be based on your unique needs and goals. A financial professional can help you develop your strategy.
What’s your plan B?
You may have a strategy for how to fund your retirement. As you likely know, however, plans are disrupted all the time. The market could take a downturn, limiting your ability to generate income. You may face serious illness or even a need for long-term care, and the related costs could drain your retirement assets.
What’s your backup plan to deal with these potential risks and more? You may want to talk to a financial professional about how you could better manage risk. For example, you could use an annuity to guarantee* your income or minimize volatility. You could consider long-term care insurance to reduce your out-of-pocket costs.
Ready to plan your retirement strategy? Let’s talk about it. Contact us today at Binversie and Associates. We can help you analyze your needs and implement a plan. Let’s connect soon and start the conversation.
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*Guarantees, including optional benefits, are backed by the claims-paying ability of the issuer, and may contain limitations, including surrender charges, which may affect policy values.
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