Retirement isn’t something to rush into. Make sure you’re truly prepared.
At this point, a lot of people are making financial plans for 2024. For some, that means gearing up to buy a home. For others, it could mean getting ready to downsize or switch jobs.
Data from Allianz finds that 22% of Americans who are currently working hope to retire in 2024. If you’ve got similar plans, then be sure to tackle these essential moves before you make your workforce exit official.
1. Figure out if your savings will provide enough income to cover your expenses
If you think you’re truly on the cusp of retirement, then at this point, you should have a decent sense of what your annual living expenses will entail. So before you retire, assess your savings and make sure that between your nest egg, Social Security, and other income sources at your disposal, you’ll have enough money to live comfortably.
Now to figure out if your savings are adequate, you’ll need to determine a withdrawal rate you’re comfortable with. If you’re retiring in your 60s, a withdrawal rate of 4% may be appropriate. For a longer retirement, consider a more conservative rate, like 3% or 3.5%, since you might need that money to last longer.
Once that rate is established, see what annual income you’re looking at from savings and take things from there. If the numbers don’t quite align, it doesn’t automatically mean you can’t retire in 2024. However, you may need to adjust some expectations and plan to spend less.
2. See if you’ll be reaching full retirement age for Social Security purposes
Full retirement age (FRA) is when you’re eligible to collect your full Social Security benefit based on your individual earnings record. FRA is either 66, 67, or somewhere in the middle.
You don’t have to wait until FRA to sign up for Social Security. You can claim benefits once you turn 62. But if you file for benefits early, you’ll reduce them on what’s likely to be a permanent basis. So see if you’ll be reaching FRA in 2024, and if not, consider holding off on filing a Social Security claim.
To be clear, it may be possible to retire without signing up for Social Security right away. And that’s something to consider if you’re not reaching FRA in 2024 but you want to end your career anyway and your savings are robust enough to support you for a while by themselves. You might also be able to simply live frugally for a short while to avoid postponing retirement, but also avoid a reduction in your Social Security income.
3. Read up on Medicare and find out if you’re eligible
If you’re already 65 or will be 65 at the very start of 2024, then you’ll be eligible for Medicare. That’s a good thing if retiring will mean losing your health insurance.
However, just because you’ll be old enough for Medicare doesn’t mean you’re all set. Medicare comes with many costs, and there are certain services it doesn’t cover. You’ll need to read up on those before moving forward with retirement to make sure you’re in a strong enough financial position to manage your healthcare expenses.
You may be gearing up to retire very shortly, and that’s something to definitely get excited about. Just make sure you’ve covered all of your bases before moving forward.
