If I could pass on just one key rule for people pondering their retirement date, it would be this:
Don’t think so much about your age. Think, instead, about your income.
Income is what helps give you your independence in retirement. If you’re confident you have enough money coming in to cover the lifestyle you want for as long you live, you have the option to quit your job any time you like. If you aren’t sure, you can’t.
From just $107.88 $24.99 for Kiplinger Personal Finance
Be a smarter, better informed investor.
Sign up for Kiplinger’s Free Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Focusing on the wrong things
You can’t just stop working at 60, 65 or even 70 without a retirement income plan to pay your bills.
Seems simple enough. Still, very few of the people who come to our office looking for help have a budget prepared or a retirement income plan in place. They’ve spent years focused on growing and saving their money, and they haven’t yet flipped their mindset to how they’ll manage that money when they no longer have a paycheck.
So they choose an age — 62, 65, 66, 70 — because those are milestone years for Social Security and Medicare, and they’re the ages when most people retire.
Look beyond your savings
Now, I’m not suggesting that instead of saying, “I’m retiring at 65,” you should say, “I’m retiring at $1 million.” Choosing a dollar amount without a retirement income plan is almost as random as choosing a retirement age.
You’re going to have to work a little harder than that.
With the help of a wealth manager, you should begin looking at your current fixed-income sources — Social Security, a defined-benefit pension (if you and/or your spouse have one) or an annuity — and how you can help maximize those payments with the proper timing and claiming strategies.
Get budgeting
You also should put together an approximate but realistic retirement budget. Don’t assume you’ll spend less in retirement than you do now — many people actually spend more in the first few years, when every day feels as if you’re on vacation.
Major expense categories include your mortgage and car payments (if you’ll still have those, or if you expect you might have them in the future), food, transportation and health care. And don’t forget the fun stuff: travel, gifts for the grandkids, golf and other hobbies. Keep in mind, too, any services you might need as you age — from yardwork to home repairs to nursing care.
Once you know your fixed income streams and your budget needs, you can determine whether there is a gap. If you have more than enough money to cover your expenses, you may be able to retire earlier than expected. If not, you’ll have to figure out how you’ll draw from your retirement nest egg to fund that gap. Your financial adviser can help you build strategies that cover asset allocation, inflation and tax implications. And he or she can help you update your plan as time passes.
Stay flexible
Ultimately, no income plan, no matter how comprehensive, can predict all the twists you might encounter during a long retirement. But if you start with a solid plan and remain flexible about refining it as you go, you’ll increase the odds that your financial future will be secure.
And the only time you’ll have to mention your age is when you ask for the senior discount.
Kim Franke-Folstad contributed to this article.
-
What’s the New 2026 Estate Tax Exemption Amount?Estate Tax The IRS just increased the exemption as we enter into a promising tax year for estates and inheritances.
-
The Economy on a Knife's EdgeThe Letter GDP is growing, but employers have all but stopped hiring as they watch how the trade war plays out.
-
Financial Fact vs Fiction: The Truth About Social Security Entitlement (and Reverse Mortgages' Bad Rap)Despite the 'entitlement' moniker, Social Security and Medicare are both benefits that workers earn. And reverse mortgages can be a strategic tool for certain people. Plus, we're setting the record straight on three other myths.
-
The End of 2%? An Investment Adviser's Case for Why the Fed Should Raise Its Inflation TargetYes, inflation can be tough on those living on fixed incomes, but protecting us from it too strictly could do our overall economy more harm than good.
-
Medicare Open Enrollment: Why You Need to Pay Extra Attention to Part D, From a Financial AdviserThe lowest premium for prescription drug coverage might not actually save you the most money. Make sure you take copays into consideration and do the math.
-
How the One Big Beautiful Bill Will Change Charitable GivingTaxpayers who don't itemize will be able to take a bigger deduction for donations, which could boost giving. However, high-income donors could see their tax benefits reduced.
-
A 'Fast, Fair and Friendly' Fail: Farmers Irks Customers With Its Handling of a Data BreachFarmers Insurance is facing negative attention and lawsuits because of a three-month delay in notifying 1.1 million policyholders about a data breach. Here's what you can do if you're affected.
-
Serving the HNW Market: How Financial Advisers Can Break Through and Deliver Lasting ValueFinancial advisers have a significant opportunity to serve high-net-worth clients by elevating their capabilities, delivering comprehensive planning, building diverse teams and prioritizing family wealth education.
-
Don't Just Sell, Connect: How Financial Advisers Can Ignite Their Sales GrowthAvoid complacency and embrace small, consistent improvements to optimize your sales process and results.
-
Are You a Small Business Owner Buckling Under Economic Pressure? Here's How You Can CopeSignificant emotional and financial challenges, including tariff worries, are piling up on small business leaders. Here's how leaders can develop more healthy coping strategies and systems of support.
