Are You Ready for Your Retirement?

As you head toward your post-work years, you may wonder at what point you will be ready for retirement. One important factor to consider is Social Security. The longer you wait to start collecting after you become eligible at 62, the higher the amount you’ll receive. Your Social Security benefits will increase with every year you delay in the eight-year period up to age 70. It’s worth calculating how much you will earn by waiting.

Your choice to start taking Social Security may be based on your income needs. But it may not be your primary deciding factor. If your health does not permit you to work, it may make sense to claim your benefits early. The longer you expect to live, the more sense it makes to hold off.

People today live longer than they did during the Great Depression when the Social Security Administration was created in 1935. Your retirement may last nearly as long as your career. You’ll want to know that your assets will support an income stream that will fund your lifestyle. Factor in a reasonable rate of inflation — around 3% a year — and calculate your new income. Include payments from Social Security, a pension, or investments such as dividend-paying stocks.

Now add up your expenses — your mortgage, your health care or a car loan. If you eliminate expenses before you retire, the amount of money you need month to month could be a lot lower than it was while you were working. Start paying off larger debts as you can. This includes credit card balances and personal loans that you’ve been carrying for a while.

Do not make the mistake of thinking that you can make up for shortfalls with your retirement savings. Experts agree that taking no more than 4% each year from your retirement assets is a good way of ensuring that you will not run out of money.

Even if your 401(k) fees seem small, they can have a big impact over time. Too often, people choose investments in their 401(k) plans without understanding investment company charges. High fees can reduce your savings by thousands of dollars.

Here are some frequently asked questions about retirement savings.

• If you’re over 50, is it too late to begin retirement planning? It’s never too late. Preparation is the key to a successful retirement. Examine your financial circumstances. Map out your retirement goals and dreams, and then figure out what they will cost to help you see what you will need to do before retiring.
• Can you collect Social Security benefits if you are a green card holder? Yes. If you’re working legally in this country, you pay into the system just like U.S. citizens do, and your contributions help support current beneficiaries.
• Will you get the same amount out of Social Security that you put in? Social Security is not an individual investment program. The total amount of your benefits depends on how much you earned, when you retire, and how long you live.
• Can you collect Social Security benefits if you are still working? You can receive benefits while working, but if you are younger than full retirement age — which is currently 66 — and earn more than a certain amount, your monthly benefits will be temporarily reduced. The SSA says you will receive higher monthly benefits later if benefits are withheld because of work.
• Should you take a spousal benefit first, then your own? Yes, it can raise your Social Security benefit in a big way. You can delay taking benefits based on your own work record and apply for benefits on your spouse’s record. Your check would be equal to 50% of your spouse’s, and because you held back on your own benefits, you would accrue delayed retirement credits that would bump up your own future check by 8% a year until you reach age 70.

To help you make a decision that’s best for you, the AARP Social Security calculator estimates your benefits and helps you decide the best age to file a claim.

Clearly, there’s a lot that goes into deciding your optimal retirement age. You need to analyze your finances carefully to be sure your assets are adequate to support you in the retirement you want. Whether you’re 25 or 65, work with financial and legal professionals to make sure your retirement plans are on track.