The average retirement age in the United States ranges from 61 to 67 years old, depending on which state you live in. With that said, determining the right time to retire can be tricky. After all, everyone’s health, goals and financial situation is uniquely their own, so what might work for your peers might not work for you.
Because retirement can be a complex process, many people end up leaving the workforce too early. This can lead to long-term repercussions down the line. In some cases, early retirees even end up unretiring due to financial or other complications.
If you’re thinking about retiring soon, here are several signs that you might want to wait for another year before making the leap.
You’re Not Financially Prepared To Support Your Lifestyle
Having a clear idea of what your life during retirement will look like is invaluable to helping you decide whether to retire, but it’s not enough on its own. You’ll also need enough money to support your desired lifestyle. This is especially important since most retirees live on a fixed income.
“Consider life goals and personal projects that someone might have put on hold during their working years. If they have a clear vision of what retirement looks like — be it travel, a new hobby, or spending more time with family — and they are financially prepared, this could be a clear sign that they are ready to embark on this new phase of life,” said Eliza Arnold, founder of Arnie.
On the other hand, if you’re still unclear on what your life will look like once you retire, or if you don’t have the necessary funds, you might want to wait another year or so.
“Imagine someone who has been diligently saving for retirement but finds that their savings might not be robust enough to support their envisioned lifestyle,” added Arnold. “In this scenario, working another year isn’t merely a delay; it’s a strategic move to bolster that nest egg, giving their investments more time to grow and providing extra income to tuck away. The general guideline of having 25 to 30 times their expected annual expenses saved is a helpful target, and an additional year of income can significantly move the needle towards reaching that goal.”
You’re Still in Debt
According to CNBC, the average American has around $90,460 in consumer debt, an amount that varies by age. Having debt can significantly cut into your retirement savings and lead to financial stress.
“If you are still in debt, you may want to wait to retire. Especially if you still have credit card debt,” said Jay Zigmont, PhD, CFP, founder of Childfree Wealth. “When you retire, you end up on a fixed income and debt can be a killer. Shoot for being completely debt free, even your house, when you retire and it will be much easier to make your money last.”
Steve Sexton, CEO of Sexton Advisory Group, added, “Having a lot of debt is a sign that you’ll need to delay your retirement. Debt — especially high interest debt — will put strain on your retirement finances. With high levels of debt, any financial emergency or unexpected cost in retirement can literally make or break your golden years.”
You’re Struggling To Pay Bills
“Retirement is a significant milestone, and it’s crucial to ensure financial stability before taking the leap,” said Anthony De Filippis, director at Amplify 11. “If you’re having difficulty meeting your financial obligations with your current income, retirement may exacerbate the situation.”
On the other hand, delaying retirement can give you more time to save up and grow your investments, added De Filippis. Even waiting just one year can give you much greater financial stability and bring about a more comfortable retirement.
You Haven’t Planned for Healthcare Expenses
“Healthcare is a substantial consideration, especially in the U.S. For individuals not yet eligible for Medicare and without a retiree health plan, that additional year of employment might be a lifeline for maintaining necessary and potentially costly health insurance coverage,” said Arnold. “It’s not just about the money; it’s about securing health, which is paramount in enjoying those golden years.”
Taylor Kovar, CFP and CEO at TheMoneyCouple.com and Kovar Wealth Management, added, “If you’re below 65 and lack a strong plan for healthcare coverage until Medicare kicks in, it’s worth reconsidering your retirement timeline. Medical expenses can cause significant damage to any budget, so having a comprehensive health plan can be a game-changer.”
You Haven’t Accounted for Social Security
You can start collecting Social Security benefits at the age of 62, but you won’t qualify for the maximum benefit amount until you reach the fully retirement age — which is 66 or 67, depending on your date of birth. If you’re relying on Social Security as part of your retirement plan, you may want to delay retiring until you’re eligible for a higher amount.
“For those eligible, delaying the initiation of these benefits, such as waiting until after the full retirement age to start taking Social Security in the U.S., results in higher monthly payouts,” said Arnold. “This isn’t just a minor increase; for each year someone waits, their Social Security benefit could increase by about 8% until age 70. Similarly, an additional year of work might mean a bump in the monthly pension benefit due to longer service and potentially higher final salary. It’s a decision that echoes into the future, potentially securing a more comfortable and stable lifestyle for years to come.”
You Don’t Have a Comprehensive Financial Plan
Having a financial plan for your retirement years, one that accounts for things like expected longevity and lifestyle goals, is essential. If you don’t have one, you might want to delay retiring.
“If you don’t have a financial plan that breaks down your monthly, quarterly, and annual budget and income in retirement, I would recommend taking the time to iron out these details before retiring,” said Sexton. “This means having an in-depth understanding of your expenses, potential future expenses, the rate of inflation, and how these factors stack up when compared to your retirement income. Without this critical roadmap, you’ll be going into retirement financially blind — and vulnerable.”
You Don’t Have an Emergency Fund
Many financial experts suggest having at least 3 to 6 months’ worth of expenses set aside in an emergency fund. If you don’t have a fully maxed out fund, you may want to wait to retire.
“It is important to make sure that you have an emergency fund built up before retiring,” said Kendall Meade, Certified Financial Planner at SoFi. “For retirees, I recommend 6 months’ worth of expenses. It is important to make sure your emergency fund is safe and accessible, but specifically set aside for such purposes.”
You Will Experience Significant Investment Losses
If you have investments, consider the current state of the market before retiring and withdrawing from them.
“Market conditions can be the wild card,” said Arnold. “If the market is experiencing a downturn when someone is considering retirement, this could mean locking in losses if they need to start withdrawing from their investments immediately. In this light, waiting another year might not only be a prudent financial decision but could also ease the mental strain of watching a lifetime of savings take a hit just when they are needed most.”
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