Many people begin planning for their retirement decades in advance. But before you actually retire from your job, you need to make sure that you’re financially ready. Though there are basic guidelines on potential ages to retire, it’s mostly a matter of making sure you’re secure enough to do so. You’ll know you’re ready to retire when you’ve done these things.
First, you’ll achieve your overall goal for your savings. Since you don’t have income from a job in retirement, you have to save a certain amount to have disposable income. A retirement calculator can be used to determine how much money you need to save before you’re ready to retire.
If you calculate that you have enough or more than the amount you need, you may be ready for retirement. But if you don’t, you might want to hold off.
Second, you’ll want to consider the time at which you’ll begin collecting Social Security benefits. There’s no requirement that you do so immediately upon retirement. Some people start claiming their benefits immediately, while others wait several years.
The age that you begin claiming benefits affects the amount you receive. You can start your claim at any point from the ages of 62 to 70. If you wait for longer periods of time, you’ll receive a higher monthly payout. A person who begins claiming their SS benefits at age 70 will gain significantly more per month than a person who begins at age 62.
People who claim at age 62 might see an overall benefits reduction of 30 percent. This is a permanent reduction that will continue to impact you for the rest of your life. Early claiming is okay for those with savings, but it might not be good for those who rely on SS as their primary source of income.
The last thing you’ll want to make sure of is that your savings are stable enough to survive if the stock market crashes. Stock market crashes can be devastating for retirees who live off the income from their investments alone. It’s hard to predict the economy, and events like the COVID pandemic can have a volatile effect.
People who live on their investments should make sure they have conservative options that won’t be crippled by an economic downturn.