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Should You Retire?
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Have you have reached retirement age and are contemplating whether to retire or not? Are you torn between retiring to your golden years or continuing to work for a few more? Here are a few tips to make your decision a little less painful.
Consider Your Age :
If you are in the 55 to 65 age range, retirement will already seem attractive to you. First of all consider your age. Realistically speaking, we only have limited number of years on this earth. Look at what you would still like to accomplish with those remaining years. Would you like to spend time going around the world? Or do you have any goals you wish to fulfill if it weren't for the daily grind of work? If that is so then you can factor in these goals and lay out a time table for your retirement and activities afterwards.
Another age-related issue to consider is your ‘actual age.' You actual age is a measurement to verify how old your body really is. Have ever wondered why some people look about 5 years younger than they really are? This could be because their bodies really are of that age. The factors that determine this aging are genetics, health habits, diet and others. If you feel that your physical age is way beyond working, you may choose to retire.
Health :
Is your health preventing you from being productive in the workforce? Or is your health making work more uncomfortable for you as time passes by? You may want to check with a doctor for a total health evaluation before considering continuing with work
Family :
Some people will want to spend more time with their families as the twilight years approach. You may want to factor this into your decision to retire.
Finances :
Will you be financially capable of sustaining your lifestyle well after retirement? If your retirement savings are not up to par with your spending lifestyle after retirement, you may want to stick it out with work for a little while longer. You also have to consider the fact that some retirement plans become more attractive if you retire later. But if you have saved up enough finances to tide you over those needs and enough to cover unexpected expenses such as medical fees, etc. as well as expenses for your planned vacation trips and other goals, you will want to retire early.
Also consider the fact that many people who retire find out that life without an occupation will turn out to be very boring. You may want to keep in touch with your employer so that he or she may offer jobs that you can do on part-time basis such as consultancy, filling in for those on vacation, etc.
Early Retirement What You Should Know
For many reasons, more and more people are opting to retire at an early age. The growing trend for the retirement is based on the fact that people are enticed to retire early than continue working and wait until they reach their retirement age of 65.
In fact, most of the surveys conducted in the United States asserted that 60% of the respondents would love to retire at an early age.
In reality, there are many benefits that people can derive when they retire early. However, there are also many consequences that result from early retirement. What they do not know is that early retirement has the potential of bringing more problems than reaping in benefits and advantages.
Here is a list of some of the reasons why retiring early can be a pretty risky activity.
1. Not in accordance with the regulations of Social Security
When people will retire at an early age, there is a great possibility that they cannot immediately obtain their Social Security benefits. This is because according to the rules and regulations of Social Security, anyone who is born after 1938 will have to wait longer than their retirement age of 65 before they can get their benefits.
Hence, early retirement may only contribute to a negative upshot if the older people's finances where not managed properly and the only thing they expect to help them are the Social Security benefits they can get.
2. If people who took early retirement get sick, they cannot acquire some Medicare benefits.
This is because the age when people can get their Medicare benefits is when they already turn 65. Hence, if they are hospitalized and they have already filed for their early retirement, they have to obtain the necessary amount of money in order to cover the expenses in the hospital without Medicare.
3. Penalty charges apply to those who retired early and had withdrawn their IRAs early.
For people who would like to retire at an early age and wish to obtain their IRAs, they have to face a hefty 10% penalty charge.
Moreover, experts contend that the nest egg of people who wish to retire early is only 80% of what they should be getting when they retire at the age of 65.
The bottom line is that early retirement is, indeed, a personal choice and preference of an individual but one must consider the factors that may affect their life in the end.
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An Emergency Fund: Your First Line Of Defense
Downsizing, rightsizing, forced retirement, layoffs, firings, outsourcing, and being made redundant.
All could mean the same thing to you: financial catastrophe.
No, you may not have to declare bankruptcy or move back in with your parents, but losing your job could put a big dent in your financial goals and even set you back several years. You may need to live on your savings or liquidate some of your investments.
If you have no savings or investments you may have to rely on credit cards and could rack up significant credit card debt. Then when you find a new job, your expenses may have increased because of the additional credit card payments.
And the job you eventually find may not pay as much as the one you lost. So you are now forced to live on less while your expenses have either continued at the same level or even gone up.
Studies show that the average worker will have six career changes in his or her lifetime. Not just job changes, but career changes.
So how can you prepare for your own financial "downtime"?
An emergency fund.
An emergency fund is really just savings. But it is not savings for a particular item or even an investment for your future or your retirement. It is your "rainy-day" fund. But unlike insurance where once you pay your premium, the money is out of your hands, your emergency fund is yours to keep.
So how much do you need? How can you build your emergency fund? And where should you keep the money?
The easiest way to figure out how large your emergency fund should be is to take your current income and multiply it by the number of months you could be out of work. If you make $3,000 each month and you want to be prepared for a 6 month "vacation", you will need $18,000.
But obviously saving $18,000 will take some time. How quickly you want to build your emergency fund depends on how concerned you may be about your current and future employment prospects.
Saving $100 each month will take you 180 months or 15 years. Saving more each month means you will be protected sooner. Also consider that during the next 15 years your income may increase and your expenses usually rise to match your income.
Also consider inflation. (If you own your home, your house payment may not rise. If you are renting, your rent probably will.) The cost of food, utilities and taxes also rise over the years. At a 3% inflation rate after 15 years your $18,000 will only buy $11,400 worth of goods.
A good rule of thumb for saving is to try to save enough each year to supply you with one month's income. This means you are saving 1/12 or 8.3% of your monthly income.
This will allow you to build your emergency fund by one month every year. After only six years you will have a six-month supply of emergency cash. Then you can continue to extend your "coverage-period" or you can divert the monthly payment into other savings or investments.
Most people find that "billing" themselves for savings and investments is a good way to put your savings on auto-pilot. If an amount is taken automatically from your bank account each month, it is easier to handle than if you wait until the end of the month and try to save from what you have left over. (How often do you have anything left over?)
So where is the best place to keep your emergency fund? Probably not a place where you can have easy access to it - too tempting. Definitely not as cash in the cookie jar - too unsafe (and no interest). And probably not in 5 year CDs - too restrictive. You may want to avoid CDs altogether so that you are not charged an early withdrawal penalty when you can least afford it.
Savings accounts are OK, but usually pay very little interest. If a savings account is your choice, open one at a bank that you don't regularly use. Also don't get a checking account to avoid the temptation to spend "just a little" bit here and there.
Or look for a money market account that pays a reasonable interest rate. You may want to consider a money market account that only invests in tax-free securities. This way you won't have to worry about paying taxes on your interest.
Then set up an auto-withdrawal from your regular checking account or direct deposit amount from your pay check right into this new account. Adjust your budget to accommodate having less money each month and forget about it.
You can also give your emergency fund a boost now and then by putting "windfall" money into to it. You know "free-money"; birthday gifts, inheritances, insurance settlements, escrow overages, rebates, tax refunds, etc.
Your emergency fund becomes your own financial insurance policy. And if you never use it you will have that much more money to play with when you retire. Or even retire early with the extra money you have saved.
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