In order to receive Social Security retirement benefits, you have to be at least 62 years of age. You must be at least 65 to be covered by Medicare. Of course, if you have the financial resources you can retire anytime you want. Early retirement is a goal of many people such as those in the FIRE movement (Financially Independent, Retiring Early).

Social Security

As explained in When should I begin taking Social Security?, Social Security was never meant to be the sole source of income for retirees. It's meant to supplement your retirement savings. That assumes that you have retirement savings. A recent study found that 21 percent of retired married couples and 43 percent of single seniors have little or no retirement savings. They rely on Social Security for 90 percent or more of their retirement income. Based on the average Social Security retirement benefit of $1,250 per month, that means these folks are living on $1,250 to $1,400 per month. 

Could you live on that? It would be hard. I know in our case that wouldn’t even make the house payment. So not only would the bank foreclose on our house, we would have to live with no food, no water, no electricity, no transportation, no television, no internet, and no cell phones. Sounds pretty bleak. That’s why it’s crucial to have retirement savings. If you are still working, I urge you to participate in your employer’s retirement plan.

EGGSTACK RETIREMENT PLANNER

Retirement Planning

When can I retire? Retirement planning is the key to answering that question. In order to develop a realistic retirement plan, you need an estimate of your living expenses in retirement. Of course, costs go up over time so you need to account for inflation. Your retirement savings have a rate of return based on the type of investment and the overall economy. After you retire, your retirement savings will continue to grow based on the rate of return, but at the same time they will diminish due to withdrawals made to cover your living expenses. Then there’s taxes. 

It’s complicated, and most people just throw their hands up and hope for the best. That is not a strategy. The best way to plan for retirement is to hire a financial advisor or avail yourself to sophisticated financial modeling software. To learn more, check out this article entitled Best Retirement Planning Software.

Your retirement is too important to rely on retirement rules of thumb or free online retirement calculators. You will sleep better when you have a solid plan in place.

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