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How to Know When to Retire: 5 Considerations

Retirement Planning
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A couple that has decided when to retire looks forward to retiring

Deciding when to retire can be much more complex than just picking a date for your last day of work. There are a number of important retirement strategies that you may want to take into consideration to help ensure you have a fulfilling and financially stable second act.

Here are five important things to think about when deciding when to retire.

1. Timing

Timing may be one of the most important factors you'll need to plan carefully. Like some workers, you may have a general target in mind for your retirement — such as the year you turn 65. However, if you are nearing that milestone, you may be anxious to cross the finish line and get started on your new work-free life. This is when little changes in timing might make a big difference.

For instance, delaying retirement by a few months can be nearly as impactful as increasing what you set aside in your retirement plan by one percentage point over 30 years, according to a paper from the National Bureau of Economic Research. While this may vary person to person, carefully deciding when to retire with the help of a trusted financial professional might make a difference in your financial comfort in retirement.

2. Health Care Costs

Even if you enjoy good health before you retire, it's important to consider the potential cost of your future medical care. For example, a healthy couple retiring in 2019 would need close to $390,000 for medical expenses during retirement. This kind of cost can come as a surprise to retirees who haven't planned ahead for their medical expenses. Taking the time to understand how you will pay for your health care needs in retirement may help you feel more confident once your retirement day finally arrives.

3. Social Security

Your Social Security benefits may be an important part of your retirement income calculations. Therefore, it's important to understand the rules governing those benefits. You can decrease or increase your monthly Social Security benefit depending on when you claim it, and the difference you'll see in each month's check can be as big as 30%. When deciding if you should take your Social Security benefit as soon as you retire, you may want to talk to a financial professional for guidance.

4. Financial Flexibility

Having a sufficient financial cushion to retire on may not necessarily be enough for your retirement. You may also need to think about how and where your money is invested. If all of your retirement portfolio is invested in volatile assets, you may face some tough choices if there is a market downturn at the same time you start your retirement. Having some financial flexibility, such as having money invested in a range of asset classes, may give you more stability when you retire.

5. Housing Costs

Before you decide when to retire, you will likely want to calculate what your post-retirement budget will look like. In particular, you may want to take a close look at your housing costs, as housing is often the largest line item in an individual's budget. How can you minimize your housing costs post-retirement? Will you have a fully paid-off mortgage, or are you carrying one into retirement with you? Do you intend to retire in place, or do you hope to move to a new retirement community? If you do plan to move, where will your moving costs come from?

There are no wrong answers to these questions — they simply affect how much you may need to plan on saving for retirement. By making these decisions before you reach retirement, you may be able to better weigh your options without feeling rushed.

6. Being Realistic About Your Time Frame

Figuring out when to retire can sometimes be complex, and sorting it out may feel overwhelming. However, taking the time to look at some real-world information and review your decisions with a financial professional can help you develop the right retirement strategies for your unique situation.

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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.