Close to retirement age? You may not want to leave the workforce just yet.
Are you counting down the days until you can retire? Even if you’re nearing the age of 62, when you can begin drawing Social Security retirement benefits – or even your full retirement age – retiring soon may not be the best move. And if you’re holding off on retiring for a little longer, you’re not alone.
Around 20% of Americans plan to delay retirement due to the economic impact of the COVID-19 pandemic, according to Northwestern Mutual’s 2020 Planning and Progress Study. Before you retire, it’s smart to take a look at whether you’re actually ready for a comfortable retirement.
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1. You haven’t saved enough
Americans’ retirement confidence is down from 2019, especially when it comes to having enough money to pay health care expenses or adequate retirement savings to last their lifetime, according to the 2020 Retirement Confidence Survey from Employee Benefit Research Institute and Greenwald & Associates.
To get a better idea of how much you will need to save for a comfortable retirement, consult a retirement planning professional or a financial planner.
2. You have a lot of debt
If you have a lot of credit card debt, car payments and a mortgage payment, it may be wise to pay off all non-mortgage debt before you retire. Entering retirement with a minimal amount of debt or no debt frees up more of your retirement income for travel, home renovations or repairs and other things you enjoy – like not tapping retirement savings so you can make credit card payments each month.
3. You can’t afford health insurance
Americans are eligible at age 65 for Medicare, the federal health insurance program for seniors. If you retire at an earlier age and don’t any employer-sponsored health insurance benefits, you could face at least $1,000 to $2,000 a month in health insurance premiums.
Even if you’re eligible for Medicare, if you want medical coverage in addition to Medicare Part A, the most basic hospital coverage, you’ll need to pay a premium for Medicare Part B. The premium for 2021 is $149 a month if your income for 2019 was $88,000 or less. If you want a prescription drug plan or a Medicare Advantage Plan, you’ll pay additional premiums.
4. You want a bigger Social Security payment
You can start drawing Social Security retirement benefits at age 62, but your monthly benefit amount increases with each year you wait to sign up for Social Security. So, if you start drawing benefits at 62, and your benefit could be reduced by as much as 30%.
Use the my Social Security Retirement Calculator to find out what your monthly benefit would be at a specific age. Waiting to draw benefits can make a substantial difference in the amount of your monthly Social Security payment. That’s because every 12 months after age 62, your benefit amount increases by 8%.
For example, if your monthly benefit at age 62 is $716, and your full retirement age is 66 and eight months, your monthly benefit would be $1,026 if you wait until full retirement age. Wait until age 70, which is the last year you can begin drawing Social Security, and your monthly benefit would be $1,266.
Find out: 5 Medicare Myths About Long-Term Care
5. You love your job
Just because you’re close to retirement age doesn’t mean you must leave behind the work you love. If you have a passion for what you do, consider staying on a few more years with your current employer, even if it’s only part-time. Meanwhile, you can continue growing retirement savings while waiting to hit an age for a higher monthly Social Security benefit.
6. You want to work part-time
Do you want to supplement Social Security and retirement savings with a part-time income or even just keep the structure that a job provides? If you’re ready to stop working full-time, but want to remain in the workforce, consider taking a part-time job after you hit your full retirement age.
Also, don’t rule out asking your current employer if working a part-time schedule is an option. That way, you might still be able to keep some employer-sponsored benefits such as health insurance, 401(k) matches or other perks.
Published by Debt.com, LLC