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

Could you afford to retire ahead of schedule—and would you want to?
A large swath of nonprofit employers from higher education to healthcare are proposing or accelerating early-retirement programs in these unprecedented times. If you’re offered an incentive to retire earlier than expected, or think you could get such an offer in the coming months, you may want to start thinking ahead.
Whether you should accept such an offer is ultimately your decision. But a professional financial advisor can help you think through your choices. Here are five key questions to help you get started:

How close are you to your retirement goals?

The way you define your retirement date is ultimately up to you, whether you determine it by your age, the size of your savings, professional achievements or some combination of factors. 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 and it 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, also consider creating an asset location strategy, says Jim Daniello, CFP®, a wealth management director at TIAA. Asset location helps you organize your assets by account types.

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 providing 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 in what order can get complicated fast, and there are many decisions that can 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?
  • Is there a way you can let battered stock investments ride for now and instead rely more heavily at the start of retirement on an annuity or other fixed income sources?
  • Is it possible to postpone collecting Social Security benefits for now to maximize the size of those payments later in retirement?
The answers to these questions and more largely depend on your own circumstances and investment mix. A goal for many investors right now is to give investment portfolios time to recover, rather than selling them and locking in losses. But most people also could benefit by waiting to file for Social Security as well (though 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 till 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 67th birthday? An advisor can help you take a closer look using tools designed to show the way annuity income and Social Security could work together, says Dan Keady, CFP®, TIAA Chief Financial Planning Strategist.

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. And wishes make you feel complete. Maybe it’s the ability to do something significant for a charitable organization. It’s the ability to leave a legacy,” Daniello explains.
Needs typically cover mortgage payments or other housing costs, taxes, utilities, food, insurance, cars, repairs and other fixed expenses. Even if you calculated this for retirement already, it’s worth taking another look if you’re now considering retiring before you qualify for Medicare coverage—and at least temporarily may have higher health coverage costs.
Also keep in mind that these categories hinge on your personal preferences. You may consider travel, golf-club membership or working with a personal trainer as needs, while someone else would see those 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, recalls seeing many clients making gifts to family members following the 2008 financial crisis.
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 of whether to retire ahead of schedule.

What will you do with your time?

Thinking about the possibilities for a blank calendar can be exciting and a little unnerving—especially if the opportunity 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. And you may have found a new passion or pursuit while staying at home that you would have more time to explore in retirement, she adds.

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? And how comfortable would you be as a stay-at-home spouse?
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, 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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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.