Have you ever wondered exactly when you’ll be able to retire? The answer to that question is no different than the answer to many questions in personal finance—it depends. There’s no right or wrong amount that you must have in your 401(k) or IRA. Nor is there a strict rule that says you have to stop working at age 65.

When Should You Retire?

I’ll offer a theoretical answer to when you should retire. If “retirement” means entering a phase of life where you stop earning income, then you can retire as soon as you have enough passive income ideas or assets to support the lifestyle you want for as long as you’re alive.

Factors That Determine When You Can Retire

To figure out exactly how much income and assets you need to fund the retirement of your dreams (or just one with a minimal amount of financial security), you have to dig deeper and ask questions, like:

  • How much income do you want each year that you’re retired?
  • How many years are you expected to live after retirement?
  • What rate of return will your investments earn before retirement?
  • What rate of return will your investments earn during retirement?
  • What is the expected rate of inflation going forward?
  • What is your expected Social Security and pension income?

How to Plan for Retirement

I know, those questions are very difficult, if not impossible, to answer with 100% certainty. In my book, Money Girl’s Smart Moves to Grow Rich, I say that planning for retirement is kind of like trying to plan a huge party when you don’t know exactly when or where it’ll be, how many people will show up, or how long it will last.

That ambiguity, combined with the fact that you’re going to need a large nest egg, is what makes saving for retirement the granddaddy of all long-term financial goals. Even though planning for retirement is tricky because the variables may seem fuzzy right now, you have to start somewhere. And the most important tip I can give you is to start planning as early as possible.

How Much Should You Save for Retirement?

You can use an online retirement calculator at sites like dinkytown.com and choosetosave.org to find out how much you should be putting aside to accomplish your retirement goals. However, remember that a retirement calculator is a tool that can’t estimate every factor of your unique circumstances.

For instance, if you currently have expensive medical needs or a family history that indicates you may have such challenges in the future, it would be wise to save more than what a retirement calculator indicates. That’s why it’s smart to sit down with a certified financial planner who can customize a retirement plan that’s right for you.

Don’t Rely Solely on Social Security

If you think you can skip the drudgery of retirement planning because you’ll just cut your expenses and live frugally off of Social Security, you need to think again. As the full retirement age creeps up and the benefits go down, it won’t be possible to have much financial security during retirement by relying on Social Security income alone.

The Benefits of Postponing Retirement

If you can’t accumulate a nest egg large enough to last your entire life, you’ll need to consider all your options. For many people, postponing retirement and working longer will be the answer. You should never leave your job or business until you’ve consulted with a financial advisor and are confident that you can afford to do so.

The majority of retirees take early retirement at age 62, but that gives you a Social Security benefit that’s reduced by as much as 30% for life. If you’re healthy, consider working until your full retirement age of 66 or 67, depending on when you were born.

How Long Should You Work?

How long you stay in the work force on a full-time or part-time basis is a personal decision, but it can give you income to keep adding to your retirement account, boost your Social Security benefits, and allow you to continue participating in employer-provided health insurance until you’re eligible for Medicare at age 65.

Affordable Places to Retire

If you’re an adventurous type, a way to retire on less or ahead of schedule is to relocate to a more affordable place where the natives don’t speak English. In Best Places to Retire Abroad, AARP.org lists countries like Panama, Argentina, Belize, Mexico, France, and Italy as top picks with good health care that welcome retired Americans.

Start Saving for Retirement Now

As I mentioned, getting started saving for retirement earlier, rather than later, is very important. Having plenty of time to invest gives you the ability to meet your goals on time with the greatest amount of wealth. But if you haven’t started saving yet, don’t burn any more time—get started now. With a plan in place you can live fully in the moment and stop worrying about your future. And who knows? If you accumulate a sufficient nest egg early, perhaps retirement may not be as far away as you think.


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