When is the Best Time to Retire? | Advent Partners

When is the best time to retire? It seems like such a simple question, and yet there are no simple answers.

Indeed, identifying the “right” time retire is a different—and deeply personal—decision for every single person, one that requires careful consideration of your personal goals, financial readiness, and health outlook. The “right” time can also evolve as your life circumstances change and external forces like market performance come into play.

The good news is that all of these issues can be accounted for and managed around if you take the time to build out a strategic retirement plan. Here are 5 best practices to help you get started.

1) Define What Retirement Means to You

Perhaps the most important piece of the retirement timing puzzle is deciding what “retirement” means to you. Do you want to stop working and travel the world? Continue dabbling in your field in a part-time role? Start a small business or a second-act career? Or maybe focus on volunteering and philanthropy?

For many of our clients, retirement planning is not about finding a way to move on to a life of endless leisure. It’s about  achieving a level of financial independence that allows them to pursue the purpose-filled work in “retirement” that they’ve always wanted to do.

Interesting fact: believe it or not, the Bible offers a lot of timeless wisdom on how to plan for a life of purpose after retirement. See what the Bible says about retirement.

2) Separate Retirement and Social Security into Two Separate Decisions

Many people view “when is the best time for me to take Social Security” and “when is the best time to retire” as a single decision.  But they are actually two separate decisions.

The trick is to remember that Social Security is just one of the many—not the only!—financial resources you can use to fund your life after retirement. If you plan well, there should be a wealth of other (and often much more lucrative) financial assets at your disposal that enable you to be more strategic about when to retire—and when to claim Social Security. Which bring us to step 3…

3) Be Strategic About Social Security

We’ll say this again because it’s important: deciding when to claim your Social Security benefits is a strategic choice. If you can afford to wait, delaying can provide a larger, guaranteed income stream later in life:

• Age 62: You can start taking benefits, but they will be permanently reduced.
• Full Retirement Age (FRA): This is typically 66 or 67, depending on your birth year. Claiming at your FRA allows you to receive 100% of your earned benefit.
• Age 70: For every year you delay claiming Social Security past your FRA (up to age 70), your benefit increases by about 8%. Waiting until 70 maximizes your monthly payment for the rest of your life.

If you have a spouse, be sure to also factor in how your decision will impact the Social Security spouse’s benefits he or she is entitled to.

4) Know the Tax Implications of Each Asset You Own

Aside from Social Security, it’s important to review your entire financial portfolio and understand what the tax and timing implications will be for each of your assets upon retirement.

Here’s an over-simplified example to illustrate the point: imagine that you have a sizeable amount of your retirement savings in an IRA, and you’ve just decided that you’d like to retire next year at age 55 to move closer to your son and daughter-in-law, who are expecting their first child. That sounds wonderful…except for the fact that, per the IRS’s rules, you’ll be incurring a 10% early withdrawal penalty on any withdrawals you make before age 59 ½. Does that mean you have to pump the brakes on your big plans?

With a well-crafted retirement plan, you shouldn’t have to. By proactively taking the time understand where all your assets are located, and the associated tax rules of each asset location, you can make sure you have a total asset allocation strategy that aligns with your retirement goals and dreams.

5) Plan for the Unknown, but Don’t Let it Derail You

Some people believe that the best time to retire will be when they hit a specific dollar amount in their retirement accounts, their net worth, or their cash in hand. But chasing a single fixed number can be dangerously short-sighted. From inflation and market downturns to major life events like divorce or a change in health, there are countless unknowns that need to be considered as you plan for your retirement.

On the other side of that coin, there are those who completely put off thinking about retirement precisely because of the fear of the unknown. This often results in having no retirement plan at all.

If either of these mindsets sounds like yours, a good financial advisor can be the key to getting you on the right track. He or she can help you identify, prioritize, and plan for the unknowns—and hold you accountable for reviewing your retirement plan regularly to ensure it keeps pace with all your life changes.

Worth Noting! Downsizing and moving into a senior living community is often one of the largest expenses people face in retirement, but many fail to plan for it until crisis hits. Be an educated consumer and take the time to learn about your senior housing options now.

Create a Happier Path to Retirement

So, when is the best time to retire? It’s clear there is no universal rule of thumb or magic number. Ironically, planning for your retirement means putting in the work. If you’re willing to do the work—planning ahead, protecting yourself from the what-ifs, and building a path to something more meaningful—you can set yourself up to enjoy the richness of a fuller and more purposeful retired life. Your future self will thank you.

It’s never too late—or too early—to start your retirement planning. Contact Advent Partners today to schedule a quick and easy initial consultation. We’re here to help make sure every aspect of your financial wellness is covered, so that you’re more financially prepared, protected, and purposeful in all you do.

Disclaimer

Thrivent Advisor Network and its advisory persons do not provide legal, accounting, or tax advice. Consult your attorney or tax professional. Representatives have general knowledge of the Social Security tenets. For complete details on your situation, contact the Social Security Administration.