Our Family of Companies
western & southern financial group logo
western & southern life logo
columbus life logo
eagle realty group logo
Fabric by Gerber Life
fort washington logo
gerber life logo
integrity life logo
lafayette life logo
national integrity life logo
touchstone investments logo
w&s financial group distributors logo

How to Know When to Retire

Retirement Planning
Smiling older couple wondering when to retire look at a map

Choosing when to retire is more complex than just picking a date for your last day of work. There are a number of important strategies to consider to help ensure a financially stable second act.

The decision is especially weighty for the millions of Americans experiencing long-term unemployment as a result of the pandemic. While simply retiring early may seem like the only solution, exiting the workforce too early can often compound one's financial difficulties.

Here are five important questions for those wondering how to decide when to retire.

1. What Will Your Expenses Be?

Before you decide when to retire, you'll want to calculate what your post-retirement budget will look like. In addition to costs such as housing, food and leisure activities, you'll also want to consider the potential cost of your future medical care.

For example, a healthy 65-year-old couple retiring in 2021 will, on average, face premiums and out-of-pocket expenses of $662,156 during their remaining lifetime, according to HealthView Services, a provider of health care cost-projection software. Taking the time to understand how you will pay for your health care needs in retirement can help you feel more confident once the day finally arrives.

Wondering what your post-retirement budget will look like? A retirement cost of living calculator can help you tally your individual expenses and determine how much income you'll need.

2. What Are Your Social Security Benefits?

While Social Security benefits alone aren't typically enough to sustain most adults in their retirement, they provide an important stream of income that can supplement other sources. While you can start receiving payments as early as age 62, you may want to wait. Those who postpone benefits until their full retirement age — between 66 and 67, depending on your birth year — receive a benefit that's up to 30% larger than those who opt for the earliest possible disbursement.

And if you postpone benefits even longer, your monthly amount could go up by 8% a year until you reach age 70. Because Social Security benefits last the remainder of your life, older workers who are in good health have a bigger incentive to hold off and receive larger benefits.

3. Do You Have Sufficient Assets?

With pensions becoming less common, many households will have to rely on money from 401(k)s and other investment accounts to maintain a comfortable lifestyle in retirement. To determine how much you'll need to withdraw each month, start with your projected expenses and then deduct payments from Social Security and any defined-benefit plans. The remaining portion will likely have to be withdrawn from your retirement accounts.

Research from the 1990s suggested that most retirees could safely withdraw 4% from their investment accounts in year one of retirement and then adjust for inflation in later years. However, many experts now suggest that a 3% withdrawal rate is more reliable, especially for those with relatively conservative investment holdings. A financial professional can help you determine whether your retirement account balance is sufficient to support you through a lengthy retirement.

Keep in mind that some retirees choose to convert some of their 401(k) and IRA assets into annuities to prevent the possibility of outliving them. The trade-off is that you'll have fewer investable dollars at your disposal.

4. Should the Long-Term Unemployed Retire?

The pandemic has prompted many workers to consider retiring, even if doing so wasn't in their immediate plans. According to the Bureau of Labor Statistics, the number of long-term unemployed workers — defined as those who have experienced 27 weeks or more of joblessness — is still 570,000 higher than it was in February 2020, prior to the global health crisis.

These individuals should be particularly careful when evaluating their readiness for retirement. Why? Because if you realize at a later date that you need additional income, reentering the workforce may prove even more difficult. For example, an employment researcher at the University of Massachusetts Amherst interviewed 120 job-seekers and found that longer gaps in one's resume, as well as age bias, equated to greater difficulty in finding a position. While some employers may be willing to overlook a long break between jobs during a health crisis, that may prove less likely years down the line.

5. Is There an Ideal Retirement Age?

The typical American worker retires at age 62, according to an annual survey by the Employee Benefit Research Institute. However, letting societal expectations guide your retirement timing — rather than your own goals and financial needs — can lead to regrettable decisions.

If you're still figuring out how to decide when to retire, remember that the best time to retire is when you feel financially secure and confident that you have the resources to sustain a fulfilling lifestyle and pay for future needs like an in-home aide or long-term care, should they become necessary.

Next Steps

Related Articles


Information provided is general and educational in nature, and all products or services discussed may not be provided by Western & Southern Financial Group or its member companies (“the Company”). The information is not intended to be, and should not be construed as, legal or tax advice. The Company does not provide legal or tax advice. Laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy, or completeness of this information. Federal and state laws and regulations are complex and are subject to change. The Company makes no warranties with regard to the information or results obtained by its use. The Company disclaims any liability arising out of your use of, or reliance on, the information. Consult an attorney or tax advisor regarding your specific legal or tax situation.