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How Do You Know When It's Time to Retire?

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The Baby Boomer generation officially arrived on the doorstep of retirement age back in 2011, and an estimated 10,000 people are now retiring daily. But while 65 is understood to be the age of retirement, many aging adults are choosing to delay retirement living. Given the unclear nature of retirement age, many people are struggling with the question of when to make the leap. Here are five factors to consider when deciding when to retire:

1. Your Health

Taking a hard, honest look at your health can be difficult, but knowing exactly what is happening with your body and mind should be a priority when considering retirement. If you’re hale and hearty, working for a few more years could mean more savings for a long and enjoyable retirement, but if your health is less than ideal, it may be worth it to retire earlier than later in order to get started on all the experiences you’ve put off until you had the time. In addition, keep in mind the health of your spouse, friends, and family members: you may not want to work through their healthy years, regardless of how much longer you’re able to.

2. Your Finances

While some experts are questioning the four percent rule, and it may not apply to some people’s specific situations, it still offers a basic guideline for how to plan your finances for retirement. The four percent rule states that in your first year of retirement, you should budget 4% of your savings for your annual spend; for every subsequent year, budget 4% with inflation factored in. You should also include any investments into your calculations, and keep a sharp eye on the markets - investment returns can be critical during the first ten years of retirement.

3. Healthcare Costs

$275,000: that’s Fidelity’s estimate for how much a retired couple will spend on healthcare over the course of their retirement. While that number may be shocking, it’s also a very real part of the costs of retirement, and something you need to plan for. Ensuring that you have the insurance and the savings to deal with general health care as well as any health issues that may arise is crucial to choosing a time to retire.

4. Social Security Benefits

Another factor to consider is the possibility of social security benefits. If you were born after 1943, you can expect an eight percent increase in benefits for each year you work after 65; if you choose to retire earlier, benefits are reduced. Increases cease at age 70, so waiting to claim benefits until then would yield maximum benefits. But be strategic: depending on other factors retiring at 70 could be unrealistic or even impossible.

5. Your Family

While the decision of when to retire is highly personal, you should also factor in the important relationships in your life. Be sure to have clear and honest discussions with your spouse or significant other as to what you want your retirement to look like. Retirement living can take the shape of traveling or relaxing, being with family or spending time on personal goals, and if you and your spouse have different visions of retirement, you may want more time for planning.

Your health, personal finances, investments, and relationships all factor into when you retire, and the truth is that there’s no longer a single age at which people can expect to retire. Talk with your family, doctors, and financial advisors on what time works best for you.

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