Deciding When to Retire – Timing is Everything
by William Bowman of AEGIS Financial 920.233.4650
Deciding when to retire is more than a one-and-done decision, it’s a series of decisions and calculations based on factors of life, income, expenses, savings, Social Security and aspirations.
I’m sure you’ve heard the phrase, “I wish I could retire today!” Can you? Do you know what your life would look like if you did?
The earlier you retire, the more years you will need your retirement savings to produce income. According to the National Center for Health Statistics, at age 65 the current life expectancy for men is 83 and for women is 85. Figuring out how long you can afford to be in retirement should be your primary consideration, but you must take into account inflation, reduced Social Security benefits, and potential penalties that will affect your income in retirement.
There are also those who plan to work until full retirement age, and although it doesn’t sound as appealing, postponing retirement allows for accrued savings, which is advantageous if you receive employer contributions into your 401(k). Waiting will also expand your nest egg’s capacity to last throughout your lifetime and give you time to smoothly transition into post-retirement life.
Taking time to create your plan is a smart way to anticipate challenges, learn what works, and see if your income will last throughout retirement. The sooner you plan and the more confident you are in retirement, the better.
Here are some key decision points:
Age 59½ – Eligible to tap tax-deferred savings without penalty for early withdrawal. Federal income taxes will be due on pretax contributions and earnings.
Age 62 – Eligible for early Social Security benefits. Taking benefits before full retirement age reduces each monthly payment. Earned income in excess of $16,920 will reduce benefits.
Age 65 – Eligible for Medicare. Contact Medicare 3 months before your 65th birthday.
Age 66 to 67, depending on when you were born – Full retirement age for Social Security. After full retirement age, earned income no longer affects Social Security benefits.
William Bowman, CPA, is President and Senior Advisor at AEGIS Financial in Oshkosh. Go to www.aegisfinancialplanners.com or call 920.233.4650.
AEGIS Financial is not a registered broker/dealer, and is independent of Raymond James Financial Services. Securities offered through Raymond James Financial Services Inc. Member FINRA/SIPC. Investment Advisory Services offered through Raymond James Financial Services Advisors, Inc. Opinions are those of William Bowman and not necessarily those of Raymond James. Content Prepared In Part by Broadridge Investor Communication Solutions, Inc.