Retiring is one of the primary goals that individuals have when they start working. The dream for many is to take beach vacations, while others simply want to lounge around the house. Knowing the right time to retire is not as easy as you might think. There are a number of considerations that you need to take into account when deciding to exit the workforce. Here are a few key signs you can use to help with making your retirement decision.
TUTORIAL: Retirement Planning
When Age Becomes a Factor
Age is one of the most critical components to consider when deciding how long to keep working. Some government jobs like the military and the federal police have maximum age limits that force employees into retirement. It is always better to leave a position a little early than to stay way too long. If you notice that you are the oldest person by far at the company meetings then that might be a good sign that it's time to turn the reigns over to the younger generation. (For related reading, see Which Retirement Plan Is Best?)
If you are still in good health and good shape, then working a few more years might be just fine for you. If you have recently gotten ill or notice your health deteriorating, then it makes sense to take a step back from your job. Work is one of the most stressful activities that anyone can engage in. It can tire the body both physically, mentally and emotionally. Retiring early could potentially extend your life longer while getting more joy and fulfillment out of your golden years.
Sick of Your Job
Do you sit at your desk day after day playing Angry Birds or Solitaire just trying to kill time? There is no point in coming into work day after day in your latter years when you are dissatisfied with your job. Life is too short to waste it coming into work angry when all you do is sit at your desk and dream of retirement. Your time would be better spent taking trips, relaxing and living out all of those retirement dreams.
More Than Enough Money
The amount of money that you have coming in plays the largest role in determining if you can retire now or have to wait a little longer. Check the balances in your retirement accounts, savings accounts and other investments. Find out exactly how much money you would receive from Social Security if you retired today. If you have a high balance in your portfolio that will keep you in the green for a long time then that may be a sign that it's time to get out of Dodge. (For related reading, see 5 Steps To A Retirement Plan.)
Time to Start Taking Required Minimum Distributions
The majority of private sector employees receive defined contributions which allow them to contribute a certain dollar amount each year to their retirement plans. 401ks and IRAs are the most common example of these plans. Most defined contribution plans also require that you to start taking withdrawals from the plan at 70.5 years old. A plan that is forcing you to take withdrawals for retirements while you are still punching a clock is a clear sign that you have stayed at your company for too long.
Maxed Out on Benefits
Most federal, state and local government employees receive pension plans which are also known as defined benefit plans. Defined benefit plans promise a certain amount of monetary compensation to be paid out upon retirement. These benefits accrue over time and are based on factors such as the number of years worked and the salary earned.
Defined benefit plans eventually reach a point where the amount of benefits that you receive maxes out. Once you reach a point where you will not receive any additional compensation for work performed, that is a good sign that it's time to hang it up. (Experts are making bleak predictions for your post-work years. For more, see The Demise Of The Defined-Benefit Plan.)
It doesn't take a ton of dough to be able to achieve all of your retirement dreams. It just takes having enough income for necessities. If your children take care of most of your bills and provide you with more income than you need, that could expedite your retirement exit. You could kick off your shoes and lounge around one of their homes while they repay you for all of the great care that you gave them growing up.
TUTORIAL: 401(k) And Qualified Plans
The Bottom Line
Deciding whether or not to retire is a decision that only you can make. If your financial situation, health, age and feelings about your job all point towards retirement, then it is time to take the plunge.