If you're on the brink of your planned retirement date, then now is a good time to step back, assess your situation, and see if you're really ready to take the final leap. After all, it's quite a challenge to un-retire if you later realize that you've made a mistake. If any of the below circumstances apply to you, then consider moving your retirement date forward a year or two until you've dealt with the problem -- even a brief delay may save you from financial disaster.
You're younger than "full retirement age"
You can claim your Social Security benefits as early as age 62, but doing so comes at a price. Social Security's "full retirement age" is the metric the agency uses to determine when you're eligible for full Social Security benefits. It varies from 65 to 67 depending on the year you were born. If you claim your Social Security benefits before your full retirement age, your benefits will be permanently reduced by as much as 30%. In other words, if your full retirement age is 67 and your full retirement benefit is $1,500 per month, then claiming your Social Security benefits at age 62 will reduce your retirement benefits to only $1,050 per month for the rest of your life.
In certain circumstances, it makes sense to claim your Social Security benefits early. After all, while your benefit checks will be smaller, you'll receive more of them. So, for example, if your health is poor and you think your lifespan will be shorter than the actuaries predict, then claiming Social Security benefits early may result in a higher total lifetime benefit than waiting until full retirement age. Finally, if you've managed to come up with so much retirement income that your Social Security benefits are just gravy, you could retire early and wait to claim Social Security until a few years down the line -- or you may decide to file early and enjoy some extra "fun money" while you're relatively young.
However, for most retirees, it makes sense to wait at least until full retirement age to claim their benefits. In fact, for every year you wait to file after full retirement age, your benefit increases by about 8% -- and a guaranteed 8% annual return is practically impossible to find elsewhere.
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You have a ton of debt
Managing an enormous debt load is tough enough when you're earning a salary. Carrying debt after you retire and start living on a smaller, fixed income can completely crush your budget. This is particularly true of credit card debt, as the steep interest charges can make your debt grow over time instead of shrinking.
If you have lots of high-interest debt, consider delaying your retirement long enough to get that debt paid off. If you prioritize getting rid of your debts by sacrificing some of your discretionary expenses and perhaps taking on additional hours at work or a part-time job, you can wipe it out with remarkable speed.
And although taking on an additional part-time job may be exhausting, it does come with an additional perk for pre-retirees: When you retire from your full-time job, you can keep the part-time job going for a while to supplement your retirement income in the first year or two. Having a side job early in retirement not only boosts your income, but can make the transition easier for you psychologically; many retirees struggle to find purpose when they go straight from a full-time job to having no commitments at all.
The stock market just crashed
It's never a happy moment when your retirement investments take a nosedive, but it's particularly dangerous when this happens right at the moment you plan to retire. A stock market crash 10 or 20 years before retirement gives your investments ample time to recover. However, when one happens just a year or two before your planned retirement date, it's unlikely that your investments will recover their value by the time you retire. And because those investments are likely your primary source of retirement income, a badly timed crash can blow your retirement plans right out of the water.
For example, say your retirement investments are worth $700,000, but then a sudden market crash reduces them to $500,000. If your retirement plans require you to withdraw $30,000 per year from your retirement savings accounts, doing so from an account with $700,000 worth of investments in it only reduces the entire account balance by about 4.3%. However, if your investments are now worth only $500,000, then withdrawing $30,000 the first year will reduce your total balance by 6% -- an amount that's likely to exceed your portfolio's gains for the year once you factor in inflation. If you're taking so much from your retirement savings accounts that they're shrinking over time instead of growing or holding steady, then you're likely to run out of money -- a nightmare scenario for any retiree.
In some cases, delaying your retirement further simply isn't an option. If you lose your job and have no prospects for another one, or if your health is too poor to allow you to work any longer, then retiring as planned is likely your best option. However, if you face one of the above obstacles and can delay your retirement a bit to deal with it, then that would be the smart move. Yes, it means another year or two of work, but at least you'll have greatly improved your odds of a peaceful and well-funded retirement.
