What’s Your Number? Figuring Out When to Retire

What’s Your Number? Figuring Out When to Retire

Just a few years ago, 65 was considered THE magic number for retiring. The story went like this: after working for several years for the same employer, you elected to retire at 65, got the proverbial gold watch, a pension, health care benefits for life, social security benefits and voilà — you were set!

Well, now the retirement landscape has completely changed.

First of all, employer provided pensions are extremely rare. And lifetime health care benefits? Fuhgeddaboudit! Now, 65 is not even considered FRA (Full Retirement Age) for Social Security benefits. The year and month you were born determine when you can begin to receive your FRA benefit. So, as you can see, there are a lot of moving parts that you have to consider before pulling the plug on everyday work life.

But consider this interesting change in dynamics: people are planning and expecting to retire at later ages. According to the 2015 RCS (Retirement Confidence Survey) conducted by Employee Benefit Research Institute and Greenwald & Associates, 36% of workers report that they expect to retire after 65-up from 11% in 1991, and 10% don’t expect to retire at all! Furthermore, 2/3 of workers say they plan to work for pay in retirement.

Clearly the trend is to continue working, but what are the primary reasons individuals are choosing to work past 65? Is it driven by financial needs or something else? Interestingly enough, many are working longer simply because they love what they do (83%), while others reported it helped them remain relevant and active (79%). But at the same time, more than 50% reported that finances played an important role in their decision as well. The reasons ran the gamut from needing additional income for extras like travel to needing money to make ends meet. Here are some other important trends to consider as well.

Health:  It might seem obvious, but your health will determine when to retire. In fact, the RCS found that of those who left the workforce earlier than expected, 60% did so as a result of an unforeseen hardship, such as a disability or a health challenge. Nearly 20% of workers had to retire early due to the failing health of a loved one.

Lifestyle:  In another recent study conducted by Fidelity Investments in collaboration with the Stanford Center on Longevity and Greenwald & Associates, 72% of retirees polled said leisure was the primary reason for retiring. And 62% chose to retire because they wanted to spend more time with their grandchildren.

Financial:  The RCS found that of those workers planning to delay retirement, the vast majority were electing to do so for financial reasons. Nearly 40% indicated that they either had inadequate finances to retire or needed funds to cover basic expenses and/or to pay for health care. According to the National Institute on Retirement Security, average account balances for those nearing retirement was approximately $100,000 — clearly not enough to retire on. Given that sobering statistic, is it any wonder that people are electing to either delay or work in retirement?

The concept of retirement is different for everyone and requires a shift in attitude and lifestyle. Individuals will now have the ability to plan and the time to travel, take up a new hobby, be more engaged in their community, volunteer, or move to a new destination. Retirement is as much an emotional decision as it is a financial one.

There’s no way to guess what cards life will deal you, but it’s easier to navigate when you have a plan.  We’re here to start the conversation and evaluate if you’re on track for taking that big leap.