Is early retirement right for me?
5 questions to consider.

Could you afford to retire ahead of schedule—and would you want to?
 
Since the start of the COVID-19 pandemic, labor force participation has fallen further among workers age 55 and over.1 The reasons have varied from workplace safety concerns, to retirement accounts flush with cash, and the acceleration of early retirement programs among  nonprofit employers from higher education to healthcare.
 
If you’re thinking about retiring earlier than expected, now is the time to put a plan in place to ensure you will have sufficient income throughout retirement. That’s where a professional financial advisor who is familiar with your retirement benefits can help. An advisor can assist you in thinking through your choices so you can make the decisions that are right for your family and your future.
 
Below are five key questions to help you get started:
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How do you know if you’re ready to retire?

There are many factors that go into determining the best time for you to retire. These may include your age, the size of your savings, professional achievements, your health and whether you’re on track toward accomplishing your lifestyle goals. One of the best ways to clarify your goals—and measure your progress in reaching them—is to create a financial plan.
 
“A lot of people still need to see where they stand, and having a financial plan can help you lay it all out,” says Mark Schrader, CFP®, a senior financial planner at TIAA.
 
 
Don’t have a plan yet? It’s not too late. Many people—even those with free access to financial advice through their workplace retirement accounts—often wait to engage until they are on the verge of retirement. Or, they may have made a plan decades ago that needs dusting off because they have maintained the same asset allocation strategy for many years that may no longer align with their risk tolerance and goals. An advisor can help you make adjustments, so you have the right mix of investments in your portfolio.
 
In addition to creating or updating your asset allocation, Schrader says it’s also important to consider creating an asset location strategy. Asset location helps you organize your assets by account types.
 
Reviewing the location of your assets can be particularly beneficial during periods of change, such as transitioning to retirement, because it helps to ensure:
  • You have the right kind of asset in the right accounts
  • Each asset has a purpose in your overall financial plan
  • You're using smart strategies to help reduce the impact of taxes and market volatility
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What are your expected sources of retirement income?

In retirement, income typically comes from three places: the federal government’s Social Security retirement program, employer pensions and annuities both of which provide guaranteed lifetime income in retirement, and investments in stocks and bonds.
 
Once you have worked through your asset allocation and location strategies, you can use that information to estimate the monthly income you could draw from your various types of savings.
 
Deciding which types of assets to tap and in what order to tap into them can get complicated fast. That's because many decisions impact your total retirement income, including:
 
  • When and how much should you draw from any savings on which you have already paid taxes vs. savings that would be taxable?
  • How will you generate income that can outpace inflation in a low interest rate environment and how could an annuity help?
  • Is it possible to postpone collecting Social Security benefits for now to maximize the size of those payments later in retirement?
 
While the answers to these questions and more largely depend on your own circumstances and investment mix. Most people also could benefit by waiting to file for Social Security although it depends on your individual situation. You can take early benefits when you turn 62, but your monthly payments would be reduced permanently. It’s generally better to wait to collect until your “full retirement age” of 66 or 67, determined by your birthdate. And if you hold off until age 70, you can maximize your monthly payments.
 
Do you have enough pension or annuity income to wait a little longer to start collecting Social Security? Alternatively, do you have savings in cash, or in bonds that generate interest payments, that can provide income until your 67 th birthday? An advisor can help you take a closer look using tools designed to show how annuity income and Social Security can work together to provide an income you can’t outlive2, says Dan Keady, CFP®, TIAA Chief Financial Planning Strategist.
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Will your income in retirement cover your needs, wants and wishes?

Now that you know how much retirement income your savings could provide, it’s time to gauge whether it’s enough to cover your expected expenses. A helpful way to think about those is as needs, wants and wishes.
 
“Needs are the things that make you feel secure. Wants are the things that make you happy, like golf memberships or vacations. Wishes are the things that make you feel complete. Maybe that's the ability to leave a legacy by doing something significant for a charitable organization or paying for a grandchild’s education,” Keady explains.
Needs typically cover mortgage payments or other housing costs, taxes, utilities, food, insurance, cars, repairs and other fixed expenses. Even if you calculated these expenses for retirement already, it’s worth taking another look if you’re now considering retiring before you qualify for Medicare coverage—and may temporarily have higher health coverage costs.
 
Also keep in mind that these categories hinge on your personal preferences. You may consider travel, a golf-club membership or working with a personal trainer as needs, while someone else may see them as wants, Schrader notes.
 
Also consider including in your retirement budget any financial support you’re already providing, or would want to be able to provide, to adult children or other family members, especially in light of pandemic-related economic losses and unemployment. Colleen Carcone, CFP®, TIAA Wealth Planning Strategies Director, may clients making gifts to family members who have experienced hardships over the past two years.
 
Once you have come up with your totals for each category, you can review them to see how they compare with your potential income. Empowered with that information, you can feel more confident in your decision to retire ahead of schedule.
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What will you do with your time?

The concept of an open calendar can be both exciting and unnerving—especially if the opportunity to retire has come sooner than you expected. Many people nearing retirement in the nonprofit world have enjoyed fulfilling careers nurturing young minds, healing the sick, contributing to groundbreaking research or making a difference at other types of nonprofit organizations. If you’re part of this world, much of your professional and social community may revolve around the institution where you work.
 
Increasingly, academic institutions are providing their retirees (and often alumni as well) with special lectures and performances, special access to fitness centers and libraries, service opportunities and other ways to stay connected, Carcone says. You may want to ask about such resources to increase your comfort level with an early exit. You also may have found a new passion or pursuit while staying at home that you would have more time to explore in retirement, she adds.
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What about your partner?

Maybe you want to retire to the beach—but your spouse or partner prefers the mountains. Have you talked about it yet? If your retirement timing has caught you unawares, you may not have compared your visions for retirement to see if they’re in sync. As they say, there’s no better time than the present.
 
 
Even more important than deciding where to move: How does your partner feel about your retiring now? If they’re still working, will they continue to do so or leave the workforce when you do? How comfortable are they with your shift from saving for retirement to spending your retirement?
 
It’s also important to involve your partner in your discussions with your financial advisor. Meeting together with a professional can help get the conversation going—and foster clear communication to help you stay on the path toward a more secure financial future.
 
To learn more about thinking through early retirement and how you will structure your lifetime income, contact your TIAA advisor today to schedule time to talk. Your advisor is available to meet with you via phone, web conferencing or email, based on your preferences.

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Bloomberg, The 'Early' Retirement Wave Isn't Exactly That, July 19, 2021.
 
2 Annuities are designed for retirement or other long-term goals, and offer a variety of income options, including lifetime income. Any guarantees are backed by the claims-paying ability of the issuing company.
 
This material is for informational or educational purposes only and does not constitute fiduciary investment advice under ERISA, a securities recommendation under all securities laws, or an insurance product recommendation under state insurance laws or regulations. This material does not take into account any specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made based on the investor’s own objectives and circumstances.
 
Advisory services are provided by Advice & Planning Services, a division of TIAA-CREF Individual & Institutional Services, LLC, a registered investment adviser.
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