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Should I Retire Next Year?

Should I Retire Next Year?

October 19, 2021
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For many Americans, the question of when to retire is hard. There used to be a “standard plan” for many families. Most folks stayed at one job for a career. The company provided a pension. You understood what you needed to do to qualify for the pension and how much you would get. Not anymore.

Today, we all have more options and lots of choices. With added choices, comes responsibility. So, plan wisely. And, if you are like many Americans, you are thinking about retiring sooner rather than later.

Since 2010, about two million American chose to retire each year. But, in 2020 the number jumped to three million according to data from the Pew Research Center. Experts say that the COVID-19 pandemic disrupted some careers and motivated others to make fundamental lifestyle changes. And, retirement account values grew dramatically during the year. So, 50% more people decided to retire. Can you join them?

Of course, the answer depends. The key considerations are:

How Do You Want to Live?

Location and lifestyle will shape the cost of your retirement plan. Lower cost of living locations with fewer amenities and less out-of-pocket costs, will stretch your retirement further.

How is Your Health?

Most folks will be retired much longer than they expected. Today, if you have average health this is what the Social Security Administration actuarily table says. 

What Can You Count On?

I’m talking about retirement income. Generally, most people will have four sources of retirement income.

  • Pensions from an employer. This is pretty uncommon. But, if you have one, it’s great.
  • Most working Americans will qualify for Social Security income benefits.
    1. Your Social Security will probably not be enough to live on. The maximum benefit for a person claiming benefits starting at age 70 in 2021 is $3,895 per month.
      1. If you claim at standard retirement age (around 67 for most people) your benefit will be about $3,011 per month in 2021.
      2. If you elect to claim as early as age 62, your benefit will be about $2,324 per month.
    2. But your Social Security comes with some cool features:
      1. Your benefit is GUARANTEED by the U. S. Government.
      2. Your benefit is promised to arrive every month from the time you start claiming until the day you die.
  • Your benefit will increase each year based on a calculation of the increase in the cost of living.
  • A lot of us have saved some money for retirement either with work-based retirement plans or through individual retirement plans. How much you have saved today, the rate you are adding to these accounts and the tax status of the accounts are all important considerations when you project forward into retirement.

Depending on your age, here are a few things to consider as you work to decide if you are ready to retire.

Other Considerations

Retirement might NOT mean you never work again

If you are able to continue working AFTER retirement, you add flexibility to your plan. The increased income will make it easier to cover your retirement expenses.

You may have significant healthcare expenses as you age

Long-term healthcare costs will affect most of us as we retire. And the cost is increasing. In 2014, a private room in a nursing home cost around $65,000 per year, according to Genworth Financial. By 2020, that figure was up dramatically. The survey cost for a private room in Minneapolis was around $146,000 per year in 2020. Every family needs to make a plan for dealing with this expense.

And, you might find that you want some personalized advice from an experienced, well-trained professional financial planner. Yes I am a CERTIFIED FINANCIAL PLANNER™ professional

and, I am taking a few new families into my practice each year. If you would like to talk with me, follow this LINK to find a time for us to talk.

If you would like to find a couple CFP® professionals near you, start your search here.

As you visit with financial planners, I suggest a couple things to check:

  • Is the advisor always the client’s advocate – a fiduciary advisor?
  • Is the advisor paid by clients, not financial product manufacturer or distribution network? That would be a fee-first advisor.

These two points help assure that you are working with a professional who is committed to your best interest at all times. It seems sort of obvious to me that a professional would work in this way, but it’s not automatic.

A fiduciary, fee-first, CFP® professional can help you make great retirement income choices and develop a comprehensive financial plan that is driven by your goals and priorities and addresses all aspects of your financial life. With a big-picture approach, you will be better prepared to understand your options at every step along the way.

Yes, I am a CFP® professional. I’m always a fiduciary and I work on a fee basis. And yes, I’m still taking on a few great families to be part of my financial planning practice.

If this article has you thinking about your own circumstances, contact my office at rdunn@dunncreekadvisors.com. I am always happy to meet with people who are working on their retirement plans. Dunncreek Advisors does not provide legal or tax advice, nor is this article intended to do so.