If you're like most people, retirement is a long-awaited milestone. It can be tempting to start this stage of your life as soon as possible.
However, retiring too early can make it more difficult to enjoy your senior years comfortably. But how do you know when you're ready to retire? There are three signs you may be ready to retire in 2023 -- and one good reason to hold off.
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Signs you're ready to retire now
1. You know your numbers
Retirement requires loads of planning, and the more you've prepared, the better off you'll be. Before you retire, there are a few numbers to have in mind, including:
- The amount you need to save: Everyone's savings goal will be different, but it's wise to at least have a ballpark number in mind. If you don't know how much you should save to retire comfortably, you risk running out of money too soon.
- How much you'll collect from Social Security: You can get an estimate of your future benefit amount by checking statements through your mySocialSecurity account. When you know how much to expect in benefits, it's easier to gauge whether your savings are on track.
- Other sources of income: Will you be entitled to a pension when you retire? Or maybe spousal or divorce benefits from Social Security? By accounting for all sources of income, you'll be as prepared as possible for retirement.
Of course, you can't plan every single detail of your retirement. But when your finances are in order, it's far more likely that your money will last throughout your senior years.
2. You've researched your full retirement age
Many retirees rely on Social Security benefits, and your full retirement age (FRA) will have a significant impact on how much you receive each month. Your FRA is the age at which you'll receive the full benefit amount you're entitled to, based on your work record. Your exact FRA will depend on the year in which you were born but will fall somewhere between ages 66 and 67.
If you file for Social Security before your FRA, your benefits will be permanently reduced by up to 30%. By waiting until after your FRA to claim, you'll collect a bonus amount on top of your full benefits.
3. You have a plan for healthcare
You won't be eligible for Medicare until age 65, so if you're retiring before that age, you'll need another plan for your healthcare. Also, be sure you've budgeted for healthcare expenses before you retire.
Medicare isn't free and doesn't cover everything. Long-term care, in particular, generally isn't covered by Medicare, and it can be incredibly costly. If you haven't budgeted for this expense, consider whether long-term care insurance is a good option.
When it may be smart to wait
1. Your savings are falling short
If you don't have enough saved, it may be wise to hold off on retirement. The market is rocky right now, and there's a chance that a recession could be looming.
While it's not impossible to retire during periods of volatility, it can be harder if your savings are falling short. If you withdraw your savings when the market is down, you may be selling your investments for less than you paid for them -- locking in your losses.
That may be unavoidable to an extent, but if your savings are already on the low side, those losses can sting even more. Putting off retirement by a year or two, though, could help your money last longer.
Preparing for retirement isn't easy, but the effort will pay off. There's no shame in waiting if you're not quite ready yet. By retiring at the right time for you, your senior years will be as comfortable as possible.
