When you've spent decades preparing for retirement, it may feel as if it can't come soon enough. But it's crucial to ensure you're actually ready to retire before you dive in, or else your senior years may not be as enjoyable as you'd hoped.
There's no one-size-fits-all approach when it comes to choosing the right age to retire. However, there are a few signs that you're ready to start this new chapter in life.
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1. You've achieved your savings goal
One of the most important factors to consider before you retire is how much you need to have saved to retire comfortably. Ideally, you'll have determined a savings target years ago and have been steadily working toward it. But it's a good idea to double-check that your goal hasn't changed and that you've either met or are close to meeting that goal.
Run your numbers through a retirement calculator to see how much you should have saved by retirement age, and be as accurate as possible when inputting your information. If the amount you should have saved matches (or is at least close to) the amount you have stashed in your retirement fund, you're in great shape. If not, consider whether you should hold off on retiring or whether you can survive on less in retirement.
2. You know when you'll claim Social Security
You don't necessarily have to begin claiming Social Security benefits as soon as you retire, so it's wise to consider whether you want to claim benefits right away or wait a few years.
The amount you'll collect in benefits depends on what age you begin claiming. You can begin claiming benefits anytime from age 62 to 70, and the longer you wait, the more you'll receive each month. (Technically, you can wait until after age 70 to claim, but you won't receive any extra benefits by waiting beyond that age.)
If you're retiring before age 70, consider whether you want to file for benefits right away or wait. Keep in mind that if you claim as early as possible at age 62, your benefits will be reduced by up to 30%. These reductions are permanent, too, so you'll be stuck with smaller checks for the rest of your life. If you have plenty of savings to fall back on, claiming early might be a smart move. But if you're going to be depending on Social Security to survive in retirement, delaying benefits may be your best bet.
3. Your savings can survive a stock market downturn
The stock market has experienced extreme volatility over the last few months, hitting rock bottom and also reaching record highs in a relatively short period of time. That can be concerning if you're about to retire, because although the market may be in good shape right now, there's no telling if another downturn is on the horizon.
To protect your savings from a potential market crash, it's important to ensure you're investing conservatively enough. As you get older, you'll want your portfolio to lean more toward bonds and less toward stocks. Your investments won't grow quite as much when you're investing conservatively, but they will be more protected against the stock market's wild ups and downs.
A good rule of thumb to consider when determining how much to invest in stocks and bonds is to subtract your age from 110, and the result is the percentage of your portfolio that should be allocated toward stocks. So, for instance, if you're 65 years old, approximately 45% of your portfolio should be allocated toward stocks and 55% should be allocated toward bonds. Keep in mind that this is just a general guideline, so you may choose to adjust these percentages depending on how risk-averse or risk-tolerant you are.
Choosing when to retire is a huge life decision, so it's important to consider carefully whether it's the right time. If you can check these three boxes, you just may be ready to start your retirement journey.
