If you're thinking about retiring soon, you don't want to just jump in with both feet -- especially since it can be hard to rejoin the workforce once you've left it.
You need to be personally and financially ready to move forward before taking the plunge into retirement. To do that, consider these four crucial issues.
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1. How your Social Security benefits could be affected by your retirement
First, consider how your decision to retire now will affect your Social Security benefit.
You don't have to claim Social Security just because you're retiring if you have enough savings to support you. But, if you'll be relying on these benefits and must start them when you stop working, it's worth considering how your claiming age will affect your income.
See, you have a full retirement age (FRA) based on your birth year. If you claim benefits any time before it, you'll shrink your standard benefit. And, even if you've hit FRA, if you aren't 70 yet, you'll pass up the chance to increase your standard benefit. That chance would come from earning delayed retirement credits available each month you wait to get benefits after FRA (up until 70).
You can sign into your mySocialSecurity account to see how much your retirement check would be depending on the age when you claim it. Be sure you're happy with the amount you'll get if you're getting ready to leave work and start collecting benefits.
2. What you'll do about covering healthcare costs
If you aren't 65 yet, you won't qualify for Medicare after retiring. So, you'll need a plan for health insurance.
Staying on your employer plan through COBRA is possible, but it can be expensive because your company will stop subsidizing the premiums. If you must buy a plan on the individual marketplace, it could come with higher costs and less coverage than you're used to.
Even if you do qualify for Medicare, it won't cover everything, and there are coinsurance costs to think about. Make sure you have a good idea of what you'll be paying for medical care and have plenty of money earmarked for these crucial expenses.
3. How much you'll have to withdraw from savings to meet your needs
Social Security only replaces 40% of pre-retirement income, and that's not enough. Most experts indicate you need around an 80% to 90% replacement rate. If you don't have a pension, the rest has to come from your savings.
Taking too much money out of retirement accounts too quickly could cause your balance to drop so low you don't earn the returns you need. You could find yourself running out of money quickly if this happens to you. You should make sure you can live comfortably even if you withdraw 4% or less of your account balance.
4. What you'll do with your time
Finally, consider what you plan to do with your time if you're thinking of retiring soon. Work provides structure and purpose for many people and you don't want to retire only to find yourself aimless and feeling depressed.
By considering these four issues, you can ensure you're ready for retirement and avoid regrets about your decision to say goodbye to the working world for good.
