While the biggest factor in deciding when to retire is whether
you still need or want to work, there are many other variables to
consider to ensure a comfortable and secure life after work.
"There is an upward trend in Americans working beyond age 60,"
says Gary Burtless, Ph.D, research associate at the Center for
Retirement Research at Boston College. "And we've seen an
increasing number of people staying in the workforce until age
Burtless says that the incentives within the Social Security
system and employer-matched 401(k) plan contributions can make
working later in life more financially attractive.
In addition, American's confidence in their ability to retire
comfortably is at an all time-low. According to the 2012 Retirement
by the Employee Benefit Research Institute (EBRI), 60 percent of
workers report having less than $25,000 in savings or retirement
financial retirement considerations
, Elizabeth F. Fideler, Ed.D., researcher and author of "Women
Still at Work: Professionals Over Sixty and On the Job" and a
forthcoming book on aging men in the workforce, found that a main
reason would-be retirees choose to keep working beyond age 60 is
that they enjoy the work and the feeling they are contributing and
making a difference.
How can you know whether you're ready for retirement? Asking
yourself these six questions may help. Any "no" answers may mean
it's worth waiting a little longer to retire.
1. Is your credit in order?
"High interest debt on credit cards should be paid off," says
John Ulzheimer, president of SmartCredit.com. "Otherwise it simply
doesn't make sense to retire."
Ulzheimer notes that carrying debt with interest rates higher
than your investment yields can lead to losing money every
"It's not uncommon to have some small vacation rental or
remaining mortgage debt upon retirement," Ulzheimer says. "But this
interest is tax-deductible and low-priced, with an end in sight in
comparison to credit card debt."
Ulzheimer also recommends not applying for any new credit and
cleaning up any default or collection accounts remaining on your
credit report. "Once you've stopped working, you will have less
capacity to pay off debts and you certainly don't want collections
phone calls," he says.
2. Have you maxed out your retirement
"The more money you can put in your monthly retirement income
bucket by maximizing the income from all different sources, the
better off you will be" says Steve Repak,
CFP, author of "Dollars and Uncommon Sense
"And, currently, a lot of it depends on delaying retirement."
Repak notes that your
Social Security benefits
increase until you reach age 70, and that if your employer provides
a pension or matches any investment contributions you make, such as
those made to a 401(k), it may pay to keep working and let your
accounts continue growing.
3. Is your health declining?
Good health is another reason Americans may choose to work
longer, according to Fideler.
As a healthy worker, you may find it beneficial to keep your job
-- and health insurance -- until age 65 when Medicare can cover
some of your health care expenses. If you retire before age 65, you
may pay significantly more to keep health coverage through the
COBRA program or your spouse's employee health plan, says
"Maintain as active a lifestyle as possible to save money on
health care costs
now and later," advises Dr. Paul Terpeluk, D.O., medical director
of employee health services at the Cleveland Clinic. "You will
avoid spending on prescription and over-the-counter medications,
procedures and co-pays for the major sedentary-lifestyle diseases
such as obesity, diabetes, hypertension, high cholesterol and heart
4. Are you working out of choice?
In the EBRI survey, retirees who worked gave some of these
- To buy extras
- Decreased value of their savings or investments
- Needing money to make ends meet
- Needing money to keep health insurance or other benefits
"Obviously, if you have more income than expenses, then you have
the choice to work at something you enjoy or are passionate about,"
"Well-educated, career workers over 60 are more likely to love
what they do, find meaning in their work and enjoy their patients,
clients and/or students," says Fideler, who notes that many
gradually cut back to part-time work or become consultants or
self-employed. "The decision is not irrevocable -- if they find
themselves bored, they return to work."
5. Have you minimized your income needs?
"The many retirement calculators and savings and spending
formulas don't work for everyone," says Repak. "A simple list of
monthly retirement expenses and monthly retirement income can show
you whether you have enough to retire or not. Try living that
budget for a few months to see if it's realistic," advises
If you still have college expenses, dependent family members or
other costly obligations, waiting longer to retire may help
decrease these expenses, according to the EBRI study.
6. Do you have enough cash?
Repak advises having at least two years of retirement expenses
available in liquid, insured savings accounts with the
best savings rates
you can find. This way, if you need money for a large household
repair, car mishap or health emergency, you will not have to raid
your retirement accounts or turn to credit cards.
But Repak says you shouldn't keep more in liquid assets than you
"Liquid, safe money is not currently earning interest ahead of
inflation," says Repak. "All the rest of your assets should remain
in your retirement investment vehicles."