There are plenty of good reasons you might consider retiring. Maybe you're nearing full retirement age (FRA) and have decided you're done with the rat race. Perhaps you're among the 30% of Americans who must leave the workplace due to health issues. Or it could be that you're one of the 950,000 Americans who've lost their job this year, and you're weary of looking for a new position.
With more than 4.1 million Americans retiring in 2025, you're in good company as you weigh whether you're ready to take the big step. Before you make a decision, though, ask yourself these four vital questions.
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1. What is my Social Security strategy?
Are you considering claiming Social Security before FRA (66 to 67 for most current workers)? If so, have you thought about whether it's the right move for you right now? While you can claim benefits as early as age 62, doing so permanently reduces monthly benefits. For example, if your FRA is 67 and you claim benefits at 62, your monthly benefit will be reduced by about 30%.
On the other hand, if you can wait until age 70 to claim, your benefits will be between 24% and 32% higher than they would be if you claim at 67. Here's how it would look if you were scheduled to receive $2,000 monthly at FRA:
- Claiming Social Security at 62: $1,400
- Claiming Social Security at 67: $2,000
- Claiming Social Security at 70: $2,480
Maximizing your benefits may be especially important if you're counting on Social Security to serve as a large portion of your retirement income strategy. However, there are legitimate reasons for retiring before FRA, and only you can determine whether doing so is the best move for you.
2. Do I have any major expenses on the horizon?
Does your house need a new roof, or is a large property tax bill due? Are you expected to be at a destination wedding or saving for a silver anniversary party? If you have any big expenses coming up, you'll need to decide if now is the right time to retire, or if you could use more paychecks.
If you already have that money tucked away, it's a non-issue. If not, you may have a tougher decision to make.
3. Am I financially ready to retire?
Do you know for sure how much you need to retire? If you're not quite sure, now is the time to create a post-retirement budget with an estimate of your living expenses and anything you'd like to spend money on in retirement, like travel or hobbies. Once you have an idea of your budget, you can begin to draw a picture of how close or far away you are from having enough money to make it happen.
If you're not working with a financial or retirement advisor, now would be a good time to visit one -- even for a single appointment. An advisor can remind you of any bills you've forgotten to include, like healthcare costs in retirement.
4. Will I have additional income?
Inventory any additional money you can work into your retirement plan. For example, do you have a company pension, rental income, an annuity, or a retirement plan like a 401(k) or IRA you can draw from?
If you qualify for Social Security benefits, you may be able to postpone collecting benefits until they're higher if you have other money you can count on (if that's what you'd like to do).
If you need to get away from your current job or out of your field, have you considered working part-time in a job you might enjoy more? A part-time job could be easier on you physically, allow you to spend time with others, and bring in enough extra money to help bridge any financial gaps. If you're collecting Social Security, the Social Security Administration (SSA) will hold back part of your benefits while you work, but you'll get that money back once you reach FRA.
There was a time when the FRA in the U.S. was 65, and you could count on staying with one company for your entire career. Those days are gone, and retirement decisions are becoming more complex. Before you decide what you're going to do, ensure you're comfortable with the answers to these questions.
