How to decide when to retire: 8 things to consider

Throughout our lives, we hear about retirement. It can feel like an abstract, far-away concept, so it’s easy to forget that someday we’ll actually get there.

When to retire is your decision, and it’s ideal to start preparing as soon as possible, says Sharon Marchisello, author of “Live Well, Grow Wealth.” “It’s important to have a target—sort of like a deadline,” she says. “It will help you focus and evaluate your progress.”

Tiffany Lam-Balfour, a financial services professional, agrees. “If you don’t think about when you want to retire, it makes it awfully hard to plan for and achieve a financially secure retirement,” she says.

Wondering, “When should I retire?” You’re in luck.

When you’re determining when to retire, the experts say to first consider your life goals and circumstances.

“This way you can determine where you’re at and where you’d like to go,” Lam-Balfour says. “It may also be wise to consult a financial advisor for more customized planning to help flesh out the details and potentially explore various scenarios.”

Marchisello and Lam-Balfour recommend considering the following factors as you ponder the question: When should I retire?

1. Your expected income over time

People tend to increase their earning potential as they gain experience, develop valuable skills and advance in their careers. That’s why most retirement calculators will assume a salary increase of 2-3% each year to help project how much one can expect to have saved for retirement over time.

Of course, not everyone’s income will follow such a predictable pattern. “Think through how your income may adjust with experience and hopefully promotions,” Lam-Balfour says.

For example, if your career pays handsomely early on, you might be able to retire in your 40s or even your 30s. If you work in a field where your salary grows incrementally, then a more traditional retirement in your 60s might be more realistic.

2. The nature of your work—and how much you enjoy it

Marchisello points out that not all work is the same. “Some occupations are more physically demanding than others, so you may have to retire earlier,” she says, which would require more aggressive saving.

On the other hand, you might love your job and be able to continue doing it into your golden years. If that’s the case, Marchisello says, “You might be able to cut back hours or become a consultant after you reach retirement age.” Most retirement calculators will allow you to factor in any additional income you expect to earn in retirement, and you can see how that extra money will strengthen your financial security in retirement. 

After all, money isn’t the only reason some people continue working. “If your identity is connected closely to your work, beware of jumping ship too early,” Marchisello warns. “Be sure you know what you want to do in retirement, so you don’t give up a good career to be bored.”

3. The lifestyle you want in retirement

No two retirements are the same. Before you ask, “When should I retire?” you must ask yourself what kind of retirement you want and how much it will cost. “If you’re planning extensive luxury travel or want to pursue expensive hobbies, you’ll need to save more than if you’ll be happy with a simplified lifestyle,” Marchisello says.

As you’re estimating retirement expenses, Lam-Balfour agrees that your lifestyle can influence your answer to the question, “When should I retire?” Where you want to live in retirement; how much you like to shop, dine out and travel; and whether or not you want to downsize your home are all lifestyle factors to consider, she says.

A common rule of thumb is to expect to spend 70% of your pre-retirement income in retirement, but that might be too much or too little to accommodate the retirement lifestyle you’re imagining for yourself. Retirement calculators will allow you to define how modest or extravagant of a lifestyle you will want in retirement. Make sure you’re carefully considering how you’d like to live in retirement as you decide when to retire.

4. The debt you carry into retirement

If a carefree retirement is your goal, then don’t let outstanding debt put a damper on it. Marchisello recommends paying off all your debt (including your mortgage, if you have one) before you retire.

Lam-Balfour agrees, recommending that if you have any outstanding student loans, credit card debt or a mortgage, you should ask yourself how you can pay these down ahead of your target retirement date.

Doing so, Marchisello says, can help you keep a lid on your retirement expenses and allow you to be more flexible with your lifestyle. “You don’t want to have to go back to work to pay the bills after giving up your career,” she says.

5. Your savings rate

Your savings rate is the percentage of your income (before taxes) that you’re able to save each month. The higher your savings rate, the sooner you should be able to retire.

Lam-Balfour points out that your savings rate includes the money that flows into all of your savings and investment accounts, which can include your 401(k), your IRA, any other investment accounts and your high-yield savings account.

Many retirement calculators will automatically peg your savings rate at 10% of your pre-tax monthly income, but you can typically adjust that number to more closely align with your actual savings rate.

6. Other savings goals ahead of retirement

While you might have your sights set on when to retire, life can be filled with other savings goals. Weddings, children’s education, travel, caregiving expenses—they can all add up and divert money from your retirement.

“What other goals would you like to achieve on the road to retirement?” Lam-Balfour asks. She recommends listing out these major goals and estimating their costs, so you can account for them in your plan.

7. Your health and healthcare costs

As you age, health risks (and costs) tend to go up, so it’s important to have money earmarked for healthcare expenses.

Marchisello notes that as long as you’re under age 65, you’ll have to purchase private health insurance if there aren’t coverage options available through your spouse or employer.

Keep in mind that healthcare expenses don’t end when you turn 65. “Even when you’re eligible for Medicare, it won’t cover everything, so you’ll need to purchase supplementary insurance to close the gap,” Marchisello says. “A large chunk of your pre-retirement savings should be set aside for healthcare.”

8. Your Social Security benefit

Your Social Security benefit will depend on how much you and your spouse make over the years, as well as when you decide to retire, Lam-Balfour says.

Most retirement calculators allow you to factor in your expected monthly Social Security benefit. You can estimate your expected Social Security benefit with this Social Security benefit calculator.

Once you decide when to retire, know how to get there

Are you feeling confident about when to retire? If so, then it’s time to test your retirement know-how with this retirement quiz. If there are any gaps, you’ll find the expert guidance you need to fill them as you start planning for your ideal retirement.

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