The incredible demands of your job, especially during the pandemic, may have you thinking more about your future these days. If retirement is increasingly top of mind, but you aren’t sure exactly if, when or how to retire, there are steps you can take to help you assess your finances to better determine the right time for you.
Start by understanding how much income you’ll need:
- Use your current monthly expenses as a guide—factor in rent or mortgage (including property taxes), utilities, groceries and miscellaneous expenses.
- Account for healthcare—you know better than anyone how expensive that can be. If you’re thinking about retiring before age 65, Medicare is generally unavailable, so be sure to account for the cost of continued coverage.
- Factor in inflation—it’s impossible to predict how the cost of living will increase, but today’s low inflation rates won’t last forever. Plan for a 3% rise annually for the next 10 to 15 years.
Then add up your prospective income sources, including:
- Social Security
- Pensions
- Annuities
- Other investments
Can you set a date?
Social Security will likely be a key source of your future income and should be one of the top considerations as you think about your timing. Go to SSA.gov to estimate your payments. Typically, the longer you wait to claim, the larger your payment will be. Keep in mind:
- It’s generally better to wait to collect Social Security until your “full retirement age” of 66 or 67, determined by your birthdate. If you claim earlier, your payment will be lower.
- If you hold off to age 70, you can usually maximize your monthly payments.
- Look at your other savings, such as a pension or annuity income, to help you bridge the gap so you can delay taking Social Security.
As you piece together your income plan, be aware that you can convert a lump sum of money—such as IRA, 401(k) or 403(b) balances—into lifetime income. Like Social Security, lifetime income can provide a steady stream of regular guaranteed payments.1
If you can generate enough income from Social Security, pensions, lifetime income and investments to cover your basic expenses, you probably can retire soon.
Before you decide
There are a few other factors to consider:
Debt. Even if you have adequate income, high-interest payments can eat into your future income. It may be better to work another year or two to pay it down.
Investments. You may want to reconsider your mix of stocks, bonds or other investments. Each has its own level of risk and anticipated return,2 and you’ll want to focus on protecting your savings, not just potential growth.
Readiness. Retirement is a big adjustment. You may want to look for opportunities to “try it on.” Perhaps you can explore reduced shifts, working part time or in less physically demanding jobs in healthcare before you actually commit.
Debt. Even if you have adequate income, high-interest payments can eat into your future income. It may be better to work another year or two to pay it down.
Investments. You may want to reconsider your mix of stocks, bonds or other investments. Each has its own level of risk and anticipated return,2 and you’ll want to focus on protecting your savings, not just potential growth.
Readiness. Retirement is a big adjustment. You may want to look for opportunities to “try it on.” Perhaps you can explore reduced shifts, working part time or in less physically demanding jobs in healthcare before you actually commit.
You’re not alone
Having a financial plan can give you confidence now and when you do retire. Schedule a meeting with a TIAA financial consultant virtually or by phone at 800-732-8353 to help you run the numbers and make any needed changes to build a plan that’s right for you.