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When should you retire? Consult this checklist of questions

[August 31, 2017] By Mark Miller

CHICAGO (Reuters) - The question sounds simple, but it is tough to answer: At what age should you retire?

I get this question from readers and friends more often than any other. It is difficult to answer because it brings into play such a wide range of issues: Do I have enough money to retire? What will I do with my time in retirement? Will I have adequate medical coverage? When should I claim Social Security?

The answers are highly subjective and personal.

Sometimes the retirement timing decision is outside your control. Research shows that roughly half of all workers retire sooner than expected due to job loss, illness or the need to care for a family member.

But few people are thinking about the question far enough in advance. “The decision is complicated, and often it’s not well thought-out,” said Carol Bogosian, an actuary and volunteer member of a committee studying post-retirement needs and risks for the Society of Actuaries (SOA).

“It might start with a small hand on the back from an employer, and the person hasn’t really taken the time to look at her finances, how long the money needs to last and the needs of other family members. We’re trying to get people to think about the broader issues, and not just what is right in front of them now.”

The SOA recently published a research brief outlining questions to consider when trying to decide when to retire. The full list is worth reading, and it can be downloaded at no charge (http://bit.ly/2wVZHOW). But here are some of the key issues to consider.

SHOWING THE MONEY

Financial wherewithal is the underlying driver of retirement decision-making for most Americans, of course - and retirement timing plays a critical role. But Bogosian urges workers to think about the long-range impact of the decision. “If you’re making a decision at age 65 to retire, think further down the road, because decisions you make today will have a serious effect on your financial security 20 years down the road.”

The big point here is the value of delayed retirement. This is not the right solution in all cases - for example, if you are in poor health an early retirement makes sense. But for most people, working even a few more years can boost retirement income substantially via delayed retirement credits from Social Security or a pension, greater savings, more years of employer-subsidized health insurance and fewer net years of life funded by retirement resources.

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The SOA calculated the impact of working longer for both single and married workers. A single woman who owns a 401(k) account with a balance of $245,000 and an expected Social Security benefit of $914 monthly at age 62 could expect $1,700 in monthly income if she retired at that age. Waiting until age 64 would boost her monthly retirement income by 17 percent, and by 37 percent at age 66.

The SOA found that the income boost was almost identical for a married couple, although the income figures were larger due to their combined saving and benefits. And other research points to even larger potential gains for married couples using carefully timed couples’ filing strategies (http://reut.rs/2pKIWUC)

HEALTH INSURANCE

The cost of healthcare in retirement keeps rising - Fidelity Investments reported last week that a 65-year-old couple retiring this year can expect to spend $275,000 in lifetime healthcare costs, up 6 percent from last year’s estimate. For workers retiring under age 65, the SOA recommends a careful comparison of coverage options available through the Affordable Care Act (ACA), including both the commercial marketplaces and Medicaid.

Workers age 65 or older should compare the cost of their workplace coverage with the cost of Medicare. Pay careful attention to the sign-up rules to avoid costly late-enrollment penalties. (http://bit.ly/2vpOg2o).

INTANGIBLES

Financial matters aside, individuals and married couples should think carefully about how they will spend time in retirement in order to be happy. “Socially, how will you replace the social context that you’ve enjoyed at work?” asks Bogosian. What interests will you pursue?”

Just as important, how will your sense of purpose change? Will you want to volunteer or work part-time? “Work gives us a sense of fitting into the world,” she said. “How will you replace that feeling?”

This is hardly a slam dunk. The percentage of Americans that say they are very satisfied with retirement has been falling, to just 49 percent in 2012 from 60 percent in 1998, according to the Employee Benefit Research Institute. (However, 41 percent are moderately satisfied, up from 32 percent in 1998.)

Finally, start thinking about these questions as early as possible - in your forties or mid-fifties at the latest. “That’s about as early as people can turn their attention to this,” Bogosian said. "Before that, there are so many other competing things. But waiting until five or even 10 years before retirement is very short.”

(The opinions expressed here are those of the author, a columnist for Reuters.)

(Editing by Matthew Lewis)

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