Planning To Retire in 2023? Here’s What You Need To Know

You’ve put in decades of hard work and now you’re ready to retire.

Although you’ve likely been planning for this transition for years, there are some things you should keep in mind if you are planning to retire in 2023, given the current economic climate and government regulations.

To make sure you’re set to start this next phase of your life, here are a few things financial experts say you need to know now.

If you’re planning on making additional contributions to your retirement plans this year before beginning to cash out, be aware of the limits for 2023.

“Special catch-up contributions are allowed for individuals who are 50 years of age or over to help them boost retirement savings as they get closer to their retirement date,” said Jay Shah, former CEO of Personal Capital.

For 2023, the catch-up contribution amount for 401(k), 403(b) and some governmental 457 plans is $7,500, which equals a total contribution of $30,000. The catch-up contribution for those who participate in SIMPLE plans is $3,500, up from $3,000 in 2022.

“How much you need to have in retirement savings will vary by your lifestyle expectations and living expenses, but as a rule of thumb, aim to have 10 times your pre-retirement income saved by the time you retire,” said Melissa Ridolfi, retired senior vice president of retirement and cash management at Fidelity Investments.

You want to be able to enjoy your golden years, so be sure your budget includes some wiggle room for “fun” spending in addition to covering the essentials, like housing, medical expenses and food.

“Try to quantify what you think you need for retirement and do not forget to include discretionary items like travel,” said Daniel Fan, senior managing director and head of wealth planning at First Foundation Advisors.

You may think you’re ready to retire, but it’s important to double-check your finances and withdrawal plan to ensure that you are truly financially ready to leave the workforce.

“Generally, you do not want to withdraw more than 4% from your accounts in order to meet retirement goals, so determine if this is possible,” Fan said. “The best possible way to determine if you have enough resources and how much you may need to save is to have a financial planner create a cash flow analysis for you.”

“A linear approach to calculating finances ignores the real-life complexity of subjects like inflation and investment behavior that can change substantially over time,” said Daniel Ruppel, a financial planning strategist with TIAA. “A financial plan should consider how these things can change from year to year, and how a family’s goals may be affected. For example, a series of negative investment returns in the early years of retirement can have a significant impact. An approach that assumes even a conservative positive return every year is unrealistic.”

Ideally, you will enter retirement debt-free.

“The more debt you carry into retirement the more difficult it will be to meet retirement goals, so try to pay off as much debt as possible,” Fan said. “If you have a large mortgage, you may want to consider downsizing to pay off as much of the mortgage as possible.”

“It’s important to have a strategy to spend down your savings smartly,” said Amy Richardson, CFP, financial planner with Schwab Intelligent Portfolios. “A good rule of thumb is to use guaranteed income — Social Security, pension payments, annuities, etc. — for essential expenses like housing, car loans, food and utilities. Pay for optional expenses like vacations or gifts to grandchildren with less reliable sources of income like stock dividends, and distributions from mutual funds and ETFs.”

Although it may be appealing to leave the workforce before you hit 65, this can come with a hefty additional cost.

“If you want to retire before age 65, make sure you have enough resources to pay for medical insurance since you will not yet qualify for Medicare,” Fan said. “These costs can be substantial, especially if you need to pay coverage for other family members.”

“The required minimum distribution rules vary based upon when you were born,” said Barbara Friedberg, MBA, MS, founder of Robo-Advisor Pros. “Familiarize yourself with them, as the penalties are stiff for those who miss the deadlines.”

“It’s important for people approaching retirement to understand the impact certain Social Security decisions can have on retirement preparedness,” Ridolfi said. “For example, the longer you can wait to claim Social Security, the more time there is to build savings. If you can afford to, waiting until at least you’re entitled to full Social Security benefits — between 66 and 67 — can help increase your monthly benefit. If you can delay claiming Social Security to age 70, your benefits can increase by 30% compared to what they would be had you claimed at age 65.”

You may have all your financial ducks in a row, but being mentally prepared for what this transition means is equally important.

“Since most of us receive social and psychological benefits from working, before retiring take a hard look at how you will fulfill those important needs once you’re retired,” Friedberg said. “You may not be ready to retire if you don’t have some ideas about how you will spend your time in retirement. Since jobs for older Americans may be difficult to find, take your time before deciding to retire and consider taking a month or two of vacation and try out your retirement lifestyle.”

Cynthia Measom and Gabrielle Olya contributed to the reporting for this article.