5 questions to ask when making the decision to retire

September 10, 2019

You’ve worked hard and you’ve reached the point in your life when you’re considering retirement. How can you decide if the time is right? The Oklahoma Society of Certified Public Accountants recommends a few questions to think about as part of your planning.

Will I have enough money? This is a critical question if you are going to meet your needs and wants and enjoy your new life in retirement. Assessing your post-retirement financial situation can be challenging because it can be hard to determine exactly how much income you will have or what your expenses will be. As a starting point, it is possible to get a sense of what your Social Security income will be based on your Social Security earnings record and the age you choose to retire by using the calculators on the Social Security Administration site. Try, as well, to estimate the income you will receive from other sources, such as pensions and investments and any consulting or part-time work you plan to do.

What will my costs be? It’s also possible to create a budget of your expenses in retirement using your current expense budget and making any potential adjustments, such as lower housing costs if you expect to downsize or pay off your mortgage. You can update your income and expense estimates annually as you get closer to retirement to be sure they remain realistic. How long will you need your retirement income to last? Those who reach age 65 today can expect to live an average of about 20 more years, according to the Social Security Administration, but keep in mind one-quarter of those will live past age 90. To estimate the cost of your needs during retirement, check out this life expectancy calculator.

When is the right time to take social security? You can begin receiving Social Security benefits as early as 62, but as tempting as it sounds, that may not be your best choice. If you start collecting benefits before your full retirement age, they will be reduced. If you wait until full retirement age (which varies based on the year you were born), you’ll get a higher monthly benefit. Put off retirement until age 70, however, and your benefits will be even higher. Your CPA can help you understand your options and make the best decisions for you.

What about health care costs? This question is top of mind for many people. Only 59% of workers are very or somewhat confident they will be able to afford medical expenses in retirement, according to an Employee Benefit Research Institute survey, and only 15% are very confident they will be able to afford long-term care. It’s wise to factor potentially higher health care costs into your retirement budget planning.

Do I actually want to quit? Jobs can offer a great deal of fulfillment as well as social interaction, and many retirees miss both when they quit working. One way to prevent that problem is to plan in advance how you’ll spend your time. Will you continue to work part time, become a volunteer, pursue educational interests or travel? Do your plans fit with your expected financial situation? Considering these issues in advance can improve your chances of an enjoyable retirement.

Retirement can be an exciting time of life, but there can be a lot of uncertainty when it comes to planning for retirement and deciding when to do it. The good news is your local CPA can offer you the information and insights you need to make important financial decisions. For personalized financial assistance, go to www.FindYourCPA.com where you can get a free referral and free 30-minute consultation from Oklahoma CPAs, including some who specialize in retirement planning.

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