In a recent column, we outlined five reasons to consider taking the plunge into retirement. For balance, we thought we’d add to that discussion by pointing out five dangers of jumping too soon. Here is our short list:
you don’t have a plan
Age is just a number, they say. But sometimes people give too much meaning to age 65, viewing it as a sign of retiring. Retiring just for a number is rarely a good idea. You need a plan that outlines how you want to spend your money and time, and how you can do the things you’re passionate about.
you are tired of your job
If you enjoy your career but your current working conditions aren’t ideal, don’t just pull the lever on retirement – change jobs! Retirement is a major life decision that should not be made in a hurry. When most people retire, many want to stay busy and keep their minds active—either by volunteering their time, mentoring younger colleagues, or starting a business.
Your Portfolio Won’t Handle It
We often ask new clients if they have ever calculated the amount they will need for their desired lifestyle in retirement. It’s amazing how many people have taken this step, and how many are shocked when they learn how far they’ve come.
We advise many of them that taking an extra year or two to shore up their retirement accounts can be beneficial. Taking the time to set up an emergency fund, making any necessary adjustments to your asset allocation, reducing your future tax burden, and putting a little more money in your retirement account can make a big difference.
Your Spouse Isn’t Ready
There are a lot of considerations when it comes to something big like your retirement. And one of the biggest is the financial and emotional support of your spouse or partner. When one of you retires early, you will no longer have two incomes. Unless your working spouse’s income is substantial, you will need to supplement your income in some way.
Then there is the individual side of the equation. Retirement will give you lots of free time to pursue your passion, but if your spouse isn’t ready or ready to retire at the same time, hurt feelings can ensue. The important thing is to keep communication lines open, to be on the same page, and to be prepared to manage any bumps in the road.
You have reached the youngest age to claim Social Security
Unless you’re retiring after reaching full retirement age (FRA) of about 67, you probably want to keep working or avoid receiving Social Security benefits. That’s because the decision to claim benefits early versus delaying them boils down to a trade-off between receiving a lower monthly benefit in the long run versus choosing a larger monthly benefit in fewer years. .
For example, claiming benefits at age 62 will give you a smaller monthly benefit. But if you delay receiving benefits beyond your FRA, you’ll increase your benefit by 8 percent for each year you wait — until age 70, after which there’s no point in delaying.
Of course, your age is only one factor to take into account when deciding to claim your Social Security benefits, including your health, and whether you or your spouse wants to continue working part-time.
By working with an advisor experienced in retirement planning and Social Security benefit analysis, you can identify the best time to retire, and potentially maximize the lifetime benefits you and your spouse are eligible to receive. Huh.
The opinions expressed in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
Bruce Helmer and Peg Webb are financial advisors at Wealth Enhancement Group and co-hosts “Your Money” on Sunday Mornings on KLKS 100.1 FM. Email Bruce and Pegg at [email protected] Securities offered through LPL Financial, Member FINRA/SIPC. Advisory services offered through Wealth Enhancement Advisory Services, LLC, a registered investment advisor. Wealth Enhancement Group and Wealth Enhancement Advisory Services are separate entities from LPL Financial.