Last updated on February 1st, 2021 at 08:35 am
After years of work everyone is entitled to a long and happy retirement. In your retirement years you can spend your time fulfilling lifetime hobbies, time with friends and family or even travel the world.
Sadly, many folks are afraid of retirement as it has it can leave you in a financial burden and stress. One of the best ways to retire is to plan for it early and keep to that plan. Below are some ways to know when is the right time to transition into retirement.
Being ready for retirement is not only a financial decision, but an emotional and social one as well.
In order to enter retirement it is best to be prepared with a financial plan that will meet your retirement needs and expenses.
Retirement income can vary from a variety of sources such as social security, pension (if you have one), savings, investments and other sources. All of these added up should cover your retirement plans. It is best to check if your overall source of income will allow you to live comfortably into your golden years. If not it might be better to wait a bit longer.
Health costs are expensive no matter what age you are. If you retire at 65 or later you may qualify for Medicare. If that is not an option make sure you have a financial nest egg or plan for those medical expenses.
At of time of writing this article, 67 years old is considered full retirement age if you are born after 1960. You are able to claim social security as early as 62 years old. Anything before 67 years old is not recommended, as claiming it before 67 will result in a penalty of up to a 25% reduction in your payments. If you can financially afford it, it is better to wait till you are 70 years of age because you can earn 130% or more than at 67.
When you were in the workforce you were surrounded by colleagues. Many find their identity in their profession. When you retire those surroundings and identity will ultimately change. Part of being ready for retirement is knowing that you are prepared for that transition, and have a social network outside of your profession.
When you enter retirement your income will be transitioned into a fixed income. If you are still paying off debt such as a car, mortgage, credit card debt or other loans, this will significantly strain your financial situation and make it harder to adjust to unexpected financial emergencies. Having debt going into retirement could also prevent you from enjoying thing such as travel in your retirement.
Having a plan for retirement is great, but unfortunately not everything in life goes according to plan. There may be unexpected expenses that will need to be covered outside of your normal spending. There could also be situation where the market crashes and your investments are impacted. It is always best to have some money set aside for a rainy day if needed.
Moving from the day to day of a job into retirement is a big change. Retirement will free up time that you may not have had previously while working. As you prepare for retirement make sure you have things that can occupy this time such as volunteering, hobbies and social interaction. Most importantly, ask yourself if retirement allow you to be happy.