Perhaps one of the most important decisions you’ll make about retirement is knowing when to retire. This will take some serious planning and knowing what steps to take beforehand, in order to avoid making a bad mistake in timing. The key to knowing when to retire will largely be decided by knowing how much money will be needed for that event to take place, and then actually getting it.
When it comes to knowing when to enter retirement and how much you will need, your plans will have to start with knowing how much you will be getting from other sources, and the age at which you hope to retire. Of course, the earlier you plan to retire, the more money you will need.
One goal for monetary savings, says Money.CNN, is to have somewhere between 10 to 16 times the amount of your annual salary saved up. If you plan on retiring when you are 50, then you will need to have a lot more money in the bank – like around $600,000 more.
The amount of money you need will depend on several things. This would include:
- How you intend to live while in retirement – in luxury or conservatively.
- Where you are going to live and what expenditures (bills, taxes, etc.) you will still have.
- Whether or not you plan on continuing to work part-time.
The amount of money that you are able to receive from Social Security can also be a big factor when choosing the perfect time to retire. The Department of Labor shows the difference waiting a single year can make. For instance, they point out, if you made $60,000 per year in 2009, and retired at age 62 in 2010, then you would receive $1,172 each month from Social Security. If this same individual waited just one more year, he would receive another $1,080 each month; if he waits until 66, he would receive $1,645 monthly.
Another key factor when determining the time to retire may be when you are able to pay off your debts, or at least bring them down to an easily controllable amount. If you have a large house, you may want to trade it in for a much smaller one, and buy it in a place where real estate taxes are very low.
Many people today are not going to be able to retire. They simply are not making enough to build up a savings large enough to do this. This is why it is very important to start saving early – at least ten years before you intend to stop working. There are retirement calculators available online, such as the one at AARP to help you determine when you have enough money to take the next step – actually go into retirement.
Getting enough money is easier if you take advantage of the various means that are available. If you work at a place where an employer will match funds, this is both the fastest and best way. When you look for places to invest your retirement money, you want to try and get the highest interest possible, but with relatively low risk – especially if you are older. If you are reasonably healthy, you might put some money into a health savings account (HSA), which will enable you to have a tax deduction and earn money that is tax-deferred. Once you’ve hit your savings goals, you’ll know when to retire – whenever you like.