Fly On Wall Street

3 Factors in Determining Your Ideal Retirement Age

Should you retire at age 65? 70? Sometime during your 50s?

There’s no easy way to answer that question, as there are benefits and drawbacks to leaving the workforce earlier versus later in life. But one thing you should do is spend some time thinking about when you’d like to retire, and these are a few important factors to look at when assessing your choices.

1. Your savings level

There’s no single amount of savings that guarantees you’ll have enough money to pay your bills throughout retirement. A good rule of thumb, however, is to aim to leave the workforce with 10 times your ending salary socked away in a 401(k) or IRA.

As such, if you’re in your 50s earning $100,000, you’ll probably want at least $1 million in savings. That way, you’re more likely to not run into major financial difficulties once your paycheck disappears. If you’re sitting on just $600,000, early retirement may not be the best choice, but if you’ve got $950,000 already, that’s a different story.

Another way to look at it is this: You’ll most likely end up withdrawing from your retirement savings at a rate of 2% to 5% per year once you leave your career behind. (Of course, there’s wiggle room with that range, but it’s a good starting point.)

Take a look at your savings and see how much annual income that amounts to. If you’re happy with the numbers you see, you may be set to retire early. If you’re worried, you may need to work longer to boost your savings.

2. Your goals

Some people aim to spend their retirement trotting the globe. Others are content staying close to home, spending time with family, volunteering, and enjoying local hobbies. The camp you fall into could dictate the age at which you ultimately retire.

If you’re hoping to travel a lot, you may want to retire at a younger age so you’re more likely to have the energy to enjoy your adventures rather than struggle through them. On the other hand, extensive travel will require a lot of savings, so you may need to delay retirement a bit to sock away ample funds. Either way, think about what you want out of retirement and how leaving the workforce at different ages aligns with your goals.

3. Your personality

Some people are content with downtime and a lack of structure. Others, less so. If you’re the type who needs to be busy, then it could pay to delay your retirement, because leaving the workforce too soon may create a scenario where your mental health takes a hit. If you’re the more laid-back type who doesn’t mind approaching life day by day without a well-mapped-out plan and can afford to retire on the early side, then doing so could be rewarding, as well.

The key, therefore, is to be honest with yourself about the type of person you are, and how retirement might change your daily outlook for better or for worse.

What’s the right retirement age for you?

Narrowing down a retirement age in your 20s, 30s, or even 40s is extremely difficult, but once you reach your 50s, you should be in a better position to start making choices. As is the case with any decision in life, there’s probably no perfect solution, so rather than stress over exactly when to retire, have confidence in your ability to land on an ideal age. If you think things through carefully, there’s a good chance all will work out in the end.

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