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How Do I Check When I Can Retire?

Published in Retirement Planning 4 mins read

Checking when you can retire involves evaluating both your financial readiness and your eligibility for benefits like Social Security. It's a personalized process that combines looking at your savings, potential income streams, and key age milestones.

Understanding Your Full Retirement Age (FRA) for Social Security

One crucial step in determining your retirement timeline is understanding your Full Retirement Age (FRA) for Social Security benefits. This is the age at which you can receive 100% of your Social Security benefits, calculated based on your earnings history.

You can use the Social Security Administration's (SSA) retirement age calculator to determine your specific FRA. This tool considers your birth year to pinpoint the exact age for your full benefits. For individuals born in 1960 or later, your Full Retirement Age is 67.

Here's a general breakdown of Full Retirement Ages by birth year:

Birth Year Full Retirement Age
1943-1954 66
1955 66 and 2 months
1956 66 and 4 months
1957 66 and 6 months
1958 66 and 8 months
1959 66 and 10 months
1960 and later 67

While you can start claiming Social Security benefits as early as age 62, your monthly benefit amount will be permanently reduced if you claim before your FRA. Conversely, delaying beyond your FRA (up to age 70) can increase your monthly benefit.

Assessing Your Financial Readiness

Beyond Social Security, your ability to retire comfortably largely depends on your personal financial situation. This involves understanding your expenses, savings, and other income sources.

1. Estimate Your Retirement Expenses

Start by creating a realistic budget for your retirement lifestyle. Consider:

  • Essential Costs: Housing (mortgage/rent, property taxes, insurance), utilities, food, transportation, healthcare (including Medicare premiums, deductibles, and out-of-pocket costs).
  • Discretionary Spending: Travel, hobbies, entertainment, dining out, gifts.
  • Unexpected Costs: A buffer for emergencies or unforeseen expenses.

Practical Tip: Many people find their retirement expenses are slightly less than their working years, as work-related costs (commuting, professional clothing) disappear, and mortgage payments may cease. However, healthcare costs often rise.

2. Calculate Your Savings and Investment Needs

Once you have an idea of your annual retirement expenses, you can estimate how much you need saved. A common guideline is the 4% Rule, which suggests you can withdraw approximately 4% of your savings annually without running out of money for 30 years.

  • Example: If you anticipate needing $50,000 per year from your savings, you'd aim for a portfolio of $1,250,000 ($50,000 / 0.04).

Consider all your retirement accounts:

  • 401(k)s and 403(b)s: Employer-sponsored plans.
  • IRAs: Traditional or Roth IRAs.
  • Pensions: If you have one from a former employer.
  • Brokerage Accounts: Non-retirement investment accounts.
  • Other Assets: Rental properties, annuities, etc.

3. Identify All Income Sources

Your retirement income will likely come from a combination of sources:

  • Social Security Benefits: As discussed above.
  • Personal Savings: Withdrawals from your 401(k), IRA, and other investment accounts.
  • Pensions: If applicable.
  • Part-time Work: Many retirees choose to work part-time to supplement income or stay engaged.
  • Rental Income: From investment properties.

Other Important Factors to Consider

  • Healthcare Costs: Medicare eligibility begins at age 65. If you plan to retire before then, you'll need to budget for health insurance (e.g., through COBRA, the Affordable Care Act marketplace, or a spouse's plan) until you're eligible for Medicare. Even with Medicare, you'll have premiums, deductibles, and co-pays, so planning for supplemental coverage (Medigap or Medicare Advantage) is wise.
  • Lifestyle and Goals: What do you envision for your retirement? Do you plan to travel extensively, pursue new hobbies, or spend more time with family? Your desired lifestyle will significantly influence your financial needs and, therefore, your ideal retirement age.
  • Inflation: The cost of living generally increases over time. Ensure your retirement plan accounts for inflation eroding the purchasing power of your savings.
  • Life Expectancy: Longevity risk is a real concern. Planning for a longer retirement ensures you don't outlive your savings.

Tools and Resources for Planning

  • Online Retirement Calculators: Many financial institutions and government websites offer free calculators that can help you project your retirement savings and income needs.
  • Financial Advisors: A certified financial planner can provide personalized advice, help you create a comprehensive retirement plan, and navigate complex investment strategies.
  • Social Security Administration (SSA): Beyond the retirement age calculator, the SSA website offers a wealth of information about your benefits, including how to create an online account to view your earnings record and benefit estimates.

By thoroughly assessing your financial standing, understanding your Social Security benefits, and considering your personal goals, you can develop a clear picture of when you can comfortably and confidently retire.