Should You Retire Now To Maximize Time in Retirement, or Keep Working To Save More?

Financial advisor explaining paperwork to elderly retired couple front of desk.
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Nearly half of working Americans worry about running out of money in retirement (45%), while the rest (55%) say running out of time to do what they want in retirement is a bigger concern, a recent TIAA survey found. If you are nearing retirement age and have one (or both) of these fears, here’s how to tell if your fear is warranted and what you should do about it.

Read: Jaw-Dropping Stats About the State of Retirement in AmericaTake Action: Do These 13 Things To Boost Your Retirement Savings Now

How To Know If You May Run Out of Money in Retirement

Some people who are well funded may still be worried about running out of money — but many times, the people who have this fear have reason to believe they will run out of funds.

“What I see typically is often people are concerned about running out of money, and it’s a logical one,” said Dan Keady, chief financial planning strategist at TIAA. “Just think about it. You don’t know how long you’re going to live, you don’t know what investment returns will actually look like and [what] unexpected expenses [may come up].”

Retire Comfortably

To see if you may actually run out of funds, use the predictive tools provided by your retirement savings plan provider.

“One of the things that could be very helpful is to go on and take a look at a tool and see where you stand,” Keady said. “A general rule of thumb is you want to be able to replace roughly 80% of your income.”

If you’re significantly under that percentage, you may want to consider working another year or two.

“First of all, you’re older so you have fewer years that you’re going to live, but you’re also getting bigger Social Security checks,” Keady said. “The reality is, that increase in Social Security can be a big change to your numbers.”

If you don’t want to keep working full time because you are worried about time in retirement, consider a phased retirement.

“[The benefits are] two-fold,” Keady said. “There are people who will feel more secure by still bringing in some income for a period of time. And from the behavioral or psychological standpoint, it’s kind of hard to go from full-time work to not working at all. If they can set it up where they’re working less time or part-time with their employer, that can be ideal.”

Retire Comfortably

You may also want to start a new business or career venture in your post-full-time-work life.

“There are a lot of people who have wanted to start certain business activities, especially consulting activities, in an area that they have expertise in,” Keady said.

Check Out: How Long $1 Million in Savings Will Last in Every State

How To Know If You’re Ready To Stop Working

If you’re in the group that worries about running out of time, here’s how to know if you can start enjoying your retirement ASAP.

“One of the things that can help is meeting with a professional or getting education through your 401(k) or 403(b) plan, where you can get some numbers,” Keady said.

Meeting with a professional can be beneficial for several reasons.

“Most of us, if we have an important decision, even if we think we might be OK, we want to get a second opinion,” Keady said. “Very few of us are going to diagnose our own medical ailments, for example, or try to do our own lawyer work. So I think one of the things that can help is having an individual to sit down with, whether they’re representing your 401(k) plan or an advisor/planner. The other thing that I’ve seen over the years, you have some spouses where one spouse is thinking this and the other spouse is thinking this, and they really almost need an independent party to come in and talk about it. It helps to have an objective other party.”

Retire Comfortably

What To Do If You’re Feeling Conflicted

“It’s also normal to feel worried about running out of time and worried about running out of money at the same time,” Keady said. “Don’t think this is abnormal.”

The first step in figuring out the best choice for you is sitting down and thinking about where your cash flow is going to come from.

“This is the first generation where, in general, when you retire, you’re your own income captain, and you just have this nest egg,” Keady said. “Most people’s 401(k) [plans] have gone up with the market, but now you have to convert that into an income stream for an unknown number of years.”

That’s why it’s so vital to have some form of guaranteed lifetime income.

“Figure out what your Social Security is going to be, and then beyond that, think about the normal expenses we all have to pay,” Keady said.

If your Social Security alone won’t cover these expenses (which it likely won’t), you need to have some other kind of guaranteed income, such as a pension.

“Most of us just don’t have those, and if you don’t, look at [if you] can create [your] own self pension through an annuity income,” Keady said. “Knowing how much [you] need to save becomes simpler, too, if you have that guaranteed income.”

This also helps protect you from the market volatility that may affect your other retirement savings.

“Most people are probably feeling both — that tension between working another one or two years, or should I retire now?” Keady said. “From a human standpoint, we all know people who’ve retired too late and unfortunately passed away early, and others who said, ‘Boy, I wished I had worked a couple of more years.’ That’s why I think going through that surety of guaranteed income exercise is helpful.”

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About the Author

Gabrielle joined GOBankingRates in 2017 and brings with her a decade of experience in the journalism industry. Before joining the team, she was a staff writer-reporter for People Magazine and Her work has also appeared on E! Online, Us Weekly, Patch, Sweety High and Discover Los Angeles, and she has been featured on “Good Morning America” as a celebrity news expert. 
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