Retirement 101

Retirement & Investing
on April 17, 2012

The average American male has a life expectance of about 76.2 years and the average American female about 81.1 years. Most begin full-time work some time in their 20s, pursuing not just paychecks but also careers and dreams. Work can be fulfilling, but what about the dream of retirement?

When to retire. The right time to retire varies upon the individual. There are no specific rules as to when you can retire. However, you might consider three general timeframes — an early retirement, full retirement or late retirement:

  • Early retirement — Early retirement typically falls during the ages of 55 to 62. In order to retire early, you must have saved enough money to continue living comfortably for at least another 15 years if you expect to have the average American life expectancy. People who choose early retirement may decide to work part time during retirement at a job that may be hobby-like or something they’ve always dreamed of pursuing but may not have had time for when they were younger. You can work and receive Social Security benefits, but be sure to check the details at SocialSecurity.gov.
  • Full retirement — According to the U.S. Social Security Administration, full retirement age is 65 for those born in 1937 or before, but gradually increases to 67 for people born after 1959. To receive Social Security benefits, you need to have accumulated Social Security credits throughout your years of employment. In addition to Social Security, retirees will need savings and/or investments to provide an income source.
  • Late retirement — When health allows, many are electing to continue working past the age of 65 or even 67. If you really like what you do for a living, why not keep working? A career that makes you happy and allows you to earn an income is a good thing. If you elect to retire late, you may increase your pension and be eligible to apply for Medicare as soon as you do retire.

How to retire. It is difficult to retire if you do not have enough money to live on without a regular paycheck. It is prudent to begin saving for retirement as soon as you begin your first “real” job. Take advantage of your company’s 401K plans, and consider an IRA and stock investments for long-term growth. If you make $50,000 a year, you will need about $35,000 a year in retirement (about 70 percent of your annual pre-retirement income). One of the biggest monthly expenses can be a mortgage payment. Paying off your home before retirement can help free up cash for living.

Where to retire. The options for retirement locations are only limited to your financial situation, health requirements and personal preferences. If you’ve dreamed of a tropical paradise retirement, you may need to save more pre-retirement. Plan early and retire happy.

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