Here’s how to figure out when you’ll be able to retire

Retirement isn’t a one-size-fits-all situation.

Some people work hard until their 30s to retire, while others work well into their 60s and 70s before retiring.

The official retirement age in the United States is between 65 and 67 years old, depending on the year of birth. At the age of 65, Medicare benefits begin.

Delaying Social Security payments raises the eventual monthly payout, but for the vast majority of people, Social Security alone will not provide a decent retirement.

According to US News, the average monthly Social Security income was around $1,460 in January, with a maximum monthly payout of $2,860 for those retiring in 2019. It’s usually thought of as a complement to investment income and retirement savings accounts like a 401(k) or IRA.

Whether you decide to retire on the first day of your Social Security payments or not, it’s critical to think about the ideal time to retire financially. That is, when your Social Security, assets, and savings accounts are sufficient to fund your ideal retirement lifestyle.

How much money do I require to retire?

Consider both “needs” and “wants” when calculating how much you’ll need annually in retirement, advises Bobbi Rebell, a financial consultant and host of the Financial Grownup podcast. Include housing, food, and health-care costs, as well as discretionary spending on things like vacation, hobbies, and presents. If you’re moving to a new city, consider the cost of living increase or decrease.

Then, using a calculator, calculate how much you would be eligible for in annual Social Security benefits. According to the Social Security calculator on SmartAsset, a 35-year-old with a $65,000 yearly income today might start claiming around $44,000 in Social Security at age 66 (assuming they work for 35 years and collect the benefits at their scheduled retirement age). Remember that Social Security benefits may be subject to both federal and state income taxes.

If that person estimates that they’ll require $80,000 in pretax income in retirement, Social Security will pay almost half of their annual needs. The remaining $36,000 is most likely to come from their investment holdings.

Before leaving employment, that worker will need at least a $900,000 portfolio, according to the 4% guideline. The rule states that you should have enough money set aside to begin withdrawing 4% of your portfolio during your first year of retirement, gradually increasing the withdrawal to meet inflation throughout the next 30 years. It isn’t, however, a hard and fast rule.

The 4 percent rule has been challenged as an over-generalized technique despite its proven success for retirees. You may need a larger or smaller nest fund depending on your retirement age and the frequency, size, and type of assets you have. The sooner you start saving and investing, the more time your money has to compound and increase. The closer you get to retirement, the higher the risk your investments may take.

You can use a calculator like NerdWallet‘s or SmartAsset‘s to see if your current monthly savings and investments will be adequate to cover your golden years, as long as you account for inflation and periodic pay increases.

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