When Can I Retire?


Question:-When Can I Retire?

Answer:- Though one may opt to retire at anytime, deciding when can I retire can be rather tricky! There are no set rules for retiring. You may even opt to retire as early as late thirties, provided you have prepared a plan to see you through the rest of your life. Timing plays the most significant role when deciding when can I retire. The other important factors helping making decision include pension accessibility and your financial requirements for maintaining your lifestyle during retirement. Here are certain considerations that shouldn’t escape your mind while planning for your retirement:


Social Security Pensions

At whatever age you may decide to quit working, please note that you are permitted to withdraw funds from your Social Security Administration only after you have reached the age of sixty years. Though the age for full retirement differs, depending on the year of your birth, people born later than 1960 cannot claim full benefits of retirement till they attain an age of 67 years. Though you can start getting pension even on reaching the age of 62, you’ll need to face a cut of thirty percent in your pension amount.  On delaying your retirement to 65 years of age, you are entitled to get nearly 86% of your complete pension amount.

IRAs and 401ks

Various retirement contributions that you may make in anticipation of withdrawing them on your retirement are not taxed. Though you can withdraw funds kept in any eligible retirement account at any time, on withdrawing funds from a customary IRA or a 401(k) plan before reaching an age of 59 1/2, you’ll be penalized to the extent of ten percent towards premature distribution tax, apart from income tax as applicable to all funds withdrawn prematurely. Moreover, you have to start getting distributions from such accounts on becoming 70 ½ years of age or pay excise taxes. Though IRA offers certain exemptions, like expenses towards education, first-home purchases and on  appealing against hardships, allowing  you to draw funds prematurely from your IRA without any penalty, but premature withdrawals from a 401(k) are liable to cost you despite your fulfilling the exception principles.

Calculating Retirement Needs

When considering when can I retire, you need to assess if the funds you have will be adequate to maintain your lifestyle with no other source of additional income, you can opt to retire at any age you like. Though experts recommend that on retiring you should have enough arrangements to give you nearly eighty percent of your present income, it all depends on your conditions and financial requirements. You can make an approximation of the percentage of your present income that you’ll require to live comfortably and use that as a base for calculating your annual financial requirements. On multiplying that amount with the estimated number of years you expect to live will give you the total amount of funds you should have at the time of retiring.

Early Retirement and Social Security

On retiring at your full age of retirement, you can expect to get nearly forty percent of yearly wages. If you opt to retire at the age of 62, you get nearly 28% of your wages. The Social Security Administration calculates pension amount as per the contributions made by you during your lifetime meaning that on stopping to work, at 45 years of age, your pension gets severely reduced because you would have made contributions for less number of years.


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