All those long years of hard work are often in preparation for retirement without any financial worries. But once the time finally comes, it can be a mix of emotions. You might feel the excitement of being able to enjoy more free time, but you might also be overwhelmed with all sorts of thoughts, especially those that concern your finances. Since serious financial factors are involved, deciding when to retire is one of the biggest decisions you will ever make. At what age should you be retiring, then?
What is the Traditional Retirement Age?
The retirement age in most countries is traditionally 65 years old. But there is no such thing as the best age to retire or the specific definite age you should be retiring in the first place. The age when you should retire is a matter of personal decision which depends on a person’s preparation.
The exact date when you should retire can affect different factors that will impact your finances during retirement. These include taxes, Social Security distributions, benefits from your previous employer, and more.
How Does Age Affect Your Retirement Savings Income?
While the perfect retirement age doesn’t exist, when you start investing for your retirement earlier, you will also be better off because of the effects of compounding returns. If you start early, you will probably need to have a smaller investment towards your retirement since your investments will get more time to build up stock market earnings.
However, several incentives might entice you to invest in your retirement age despite starting later in life. Some tax-advantaged retirement accounts let you have more contributions to your retirement if you are already 50 and older.
Age may also affect your retirement in terms of Social Security benefits. A common concern here is that depending on your retirement age, you might not be able to gain many Social Security benefits. Also, although the eligibility for Social Security benefits begins at 62, you might need to wait until you are 70 years old to make the most out of these benefits.
Pushing back taking Social Security until you are 70 can make your monthly benefits up to 32% bigger compared to how much it will be at your full retirement age. Remember that it also depends on longevity and health factors which are unique to every person.
Factors to Consider When Planning the Best Time of Year and Age to Retire
Below are a few factors to consider when planning the best time of year and age to retire.
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- Are you planning to retire early?
- Do you have accrued vacation pay?
- Do you have a pension?
- Did you save up cash reserves?
- Will you take RMDs or required minimum distributions?
- Do you plan to take on part-time jobs after retirement?
- Will you turn 70 years of age during the year?
There is no official age for retirement and more than anyone else, you are the best person to assess when you can completely say that you are ready to retire and enjoy the best things in life to the fullest!