Should I wait until I am 70 years old to retire?
I have just heard that people should forget about retiring until they are 70 years old. Does this only apply to a certain target audience? I am thinking about retiring when I am 60 years old (9 years from now). I have about $2,300,000 in investments split equally between a 401(K) and other investments. My wife and I have always lived well under our means.
I think this question points up the uselessness of applying the same formula to everyone of a certain age. There are so many 51-year-olds in this country that have no appreciable savings and it is they who will have to work until 70 (or past). If you have saved, you can retire comfortably. (Is everyone else reading this? Now, do it!)
I usually tell clients that they have enough to retire if, after subtracting all predictable retirement income (such as Social Security, corporate or government pensions, or net income from property you own) the annual amount you need to fund your lifestyle, including taxes, is 1/20 or less of your liquid invested assets.
If you have $2.3 million now, and if you intend to let it compound untouched for the next 9 years, then if you average 5% over the next 9 years you will have about $3.6 million. (More, if you add regularly to savings between now and then.) Thus if your living needs after SS etc. are less than $15,000 per month you can afford to retire. The only reason for you to work to age 70 is if you love doing what you do and could be happy being semi-retired.
By the way, everyone should also avoid "target date funds" for this reason. You are not like everyone your age, so you should not all invest alike.
What you heard has become a new rule of thumb that effectively is simply untrue. With 35 years of experience in providing retirement planning on a fee-only basis, the key to any retirement comes in two parts. The first is personal cash flow and the second is a plan on what you will do with your time if you formally retire. One without the other is somewhat dangerous and for those who don't have adequate cash flow, retiring at age 70 is simply a different goal. Having said all this, you appear to have the necessary wherewithal to retire at age 60 but again, this is a cash flow issue. Attempt to determine your existing expenses, both fixed and discretionary and then attempt to determine how they would change if you formally retired, let's say on January 1, 2018. If the change is dramatic on the downside, you're probably being overly optimistic so be careful. When estimating expenses, always overestimate expenses to a slight extent and underestimate income in the same fashion. In this way, if you do make a mistake, it will always be in your favor. Finally, you need a plan as to what you're going to do if you actually retire. There's and old expression that says, "for better or worse but never for lunch. "You have to be careful that you're not going to be in and around the house 24 hours a day and in your wife's hair. She's lived 30 years without having to prepare your lunch and she shouldn't have to do it this time in life. I sincerely hope this helps and good luck.
Great job on the $2.3M saved! Waiting until at least age 67 will allow you to maximize your social security payout if applicable. Considering a rough calculation for 20-30 years of withdrawals, including approximate taxes, conservative investment returns, and inflation, you should be able to retire around 70 and enjoy annual support of about $60-70k. If you would like to use part of your principal for a special purpose (e.g. charity/inheritance), you may also have the option of living off of interest/dividends based on your income needs and risk tolerance with an appropriate portfolio allocation. A more accurate estimate would be possible with more details on your total financial picture.
This is an excellent question and not one that can be answered in a general sense.
Many of the factors that would go into answering this can vary from person to person and need to be evaluated on their personal facts and circumstaces. Some of the many factors that would go into determing this would be:
How much income do you need to live on in retirement?
What sources of income will you have and how much will they produce? Pension, social security, 401(k), IRA etc....
What heathcare costs are you concerned about? Do you have enough saved or insurance if a Long Term Care need arises?
Do you have goals of buying a vacation home, boat or travel?
I think you get the idea. I would highly recommend that you sit down with a fiduciary advisor and have a discussion about your personal goals, objectives and current assest to see if you will be able to retire at age 60 (or prior) based upon your own facts and circumstances.
Best of luck in going through this process! you have time on your side, which is a huge plaus. Plan now and you should be more than prepared for when the time comes to retire.
This is a glaring example of why you shouldn't take blanket financial advice that isn't based on your specific financial situation an needs.
It sounds like you have done a wonderful job building your net worth and accumulating a good amount of assets. It is safe to assume you will continue to grow this nest egg until you retire. Only real issue are plannign to Maximize Social Security and waiting until Medicare kicks in.
But as you can imagine millions of Americans are nowhere near as prepared for retirement as you appear to be. Keep up the good work, and perhaps talk to a fee-only fiduciary financial planner to make sure you are on track for financial freedom as 60.