It’s unfortunate, but true: Baby Boomers are feeling the economic pressure to work much later in life than in any previous generation. In a 2012 survey conducted by Wells Fargo, 1,000 individuals making less than $100,000 a year were asked when they planned to retire, and an amazing 33 percent said they would work until the age of 80.
The important question anyone considering retirement needs to ask is this: How do I want to spend my retirement years, and how much money do I need to do it?
Look at your finances
When determining when to retire, a good place to start is to check your finances and determine what effect — if any — your retirement will have on your family. The decision can be an easy one if you have a healthy, robust financial portfolio. However, if investing proved to be a difficult goal to achieve in life, then it’s best to look at how much money you actually need to maintain your current lifestyle, or consider downsizing.
Also, keep in mind that you cannot draw on your Social Security payments until you reach the age of 62 (at drastically reduced rates), and the Social Security Administration recommends working until the age of 67 — deferring Social Security payments until then -- to receive full benefits. Also, for every year you put off commencing Social Security payments after the age of 67, you can receive an additional 8 percent in benefit payments up to the age of 70. In 2013, the maximum amount of money you can receive from Social Security is $3,350 a month.
It's all in the calculations
To assist you in determining how much money you will need to retire comfortably (or in whatever manner you have chosen to retire), you may wish to access any number of helpful retirement calculators that are readily available free of charge online. For example:
- The Social Security Administration offers a Life Expectancy Calculator to let you know approximately how many more years you can expect to live. It doesn’t take into consideration health, family history or marital status, but it’s a good starting point when planning for retirement (if not a bit creepy).
- The Bloomberg Personal Finance Retirement Calculator lets you create your own retirement plan. With the use of a chart, it plots your current retirement – including all of your savings and withdrawals – through the end of your retirement. Social Security payments are also calculated based on your annual income.
Look at your healthcare situation
If you’re afraid to retire because you fear losing the healthcare coverage you get from your employer, consider this: More and more companies are gradually decreasing (or eliminating entirely) the healthcare plans they offer employees, instead letting them opt for coverage through the Patient Protection and Affordable Care Act (aka “Obamacare”). If you have no health insurance of any kind, Obamacare can give you some piece of mind if you can afford to tap into it. But if you already receive coverage through your employer, then that may be your safest bet depending on your deductibles and the amount of coverage being provided. However, it is important to remember that after the age of 65, Medicare and Supplemental Medical Insurance will cover much of your healthcare expenses for the rest of your life.
Health benefits of working later
While the idea of retirement may be vastly appealing to us all, studies show that our health begins to decline after we retire. Of course, our physical health naturally declines as we grow old, but it’s our mental health we need to monitor. A recent study conducted by the French government’s health agency, INSERM (http://www.english.inserm.fr/), concluded that for each additional year we work, our risk of contracting Alzheimer’s disease and other forms of dementia are reduced by 3.2 percent. Work – and the social interaction that comes with it – helps to nourish our minds, as well as our bodies.
Trust your instincts
If you’re not being forced to retire due to a layoff, a mandated retirement or illness, then ask yourself, “What is important to me right now?” Would you rather spend your days reading, traveling or babysitting the grandchildren? Have you dreamed of going back to school, spending time with friends or learning to paint? You may discover that taking a part-time job will provide you with all the extra cash you need to make your retirement goal a reality. Whatever it is you want to do, follow your heart and make it happen.
Let the free MoneyTips Retirement Planner help
you calculate when you can retire without jeopardizing your lifestyle.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Winnie Sun is a registered representative with, and securities offered through LPL Financial, member FINRA/SIPC. Investment advice offered through Sun Group Wealth Partners, a registered investment advisor and a separate entity from LPL Financial.