Here’s exactly how to figure out when you can retire

Official retirement age when a person can start claiming Pension benefits is between 65 and 67.But in many cases, Pension won’t be enough to cover all expenses in retirement. Most people need income from savings and investments, too.One common rule of thumb suggests having enough money socked away to start withdrawing 4% from a portfolio during the first year of retirement, increasing that withdrawal each year to cover inflation for 30 years.

  • To find out how much you need before you can retire, use a calculator to estimate Social Security benefits, then subtract that number from expected annual expenses and divide by 4% .

Retirement isn’t one size fits all. Some people hustle to retire in their 30s, while others work well into their 60s and 70s before leaving full-time work for good.Official retirement age when workers can begin to claim their full Social Security or Pension benefits is between 65 and 67, depending on birth year. Medicare benefits kick in at age 65.Delaying Social Security benefits increases the eventual monthly payout, but Social Security alone won’t cover a comfortable retirement for the vast majority of people. In United States for instance, the average monthly social security benefits was about $1,460 in January, according to US News, and the maximum monthly payout for someone retiring in 2019 is $2,860. In most cases, it’s considered supplemental to investment income and retirement savings accounts, such as a 401(k) or IRA.Whether you decide to retire the day Social Security benefits kick in or not, it’s important to consider the best time to retire from a financial perspective. That is, when your Social Security, investments, and savings accounts combined can generate enough income to cover your ideal retirement lifestyle.

How much do I need to retire?

To calculate how much you’ll need annually in retirement, consider both “needs” and “wants,” says Bobbi Rebell , a financial planner and host of the Financial Grownup podcast. Include costs such as housing, food, and health insurance, plus discretionary spending, like travel, hobbies, and gifts. If you plan to move to a new city, factor in the increase, or decrease, in cost of living. 

Then use a calculator to figure out how much you could be getting in annual Social Security benefits. According to SmartAsset’s calculator, a 35-year-old today whose annual income is $65,000 could begin claiming about $44,000 a year in Social Security if they retire at age 66 (that’s assuming they work for 35 years and claim the benefits at their designated retirement age). Keep in mind, Social Security income may be subject to federal and state income taxes as well.If that person figures they’ll need a pretax total of $80,000 a year during retirement, Social Security will cover about half of their annual expenses.

The other $36,000 will probably come from their investment portfolio.According to the 4% rule, that person will need at least a $900,000 portfolio before leaving work. The rule says to have enough money socked away to start withdrawing 4% from your portfolio during your first year of retirement, increasing the withdrawal each year to cover inflation for 30 years. However, it’s not a hard-and-fast rule.Despite proven success for retirees, the 4% rule been criticized as an over-generalized strategy. Depending on the age you retire and the frequency, size, and type of investments you have, you may require a bigger or smaller nest egg. The earlier you save and invest, the more time your money has to grow and compound.

The further out you are from retirement, the more risk your investments can take on, too.For a more specific outlook, you can use a calculator like NerdWallet’s or SmartAsset’s which account for inflation and periodic salary increases to find out whether your currently monthly savings and investments will be enough to cover your golden years.

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