Reshma Kapadia, senior author of Baron and Roundtable of Baron discusses how coronavirus supports some people’s retirement plans and what can be done for that lost capital.
What is the best age to retire? Are you 65 when you first qualify for Medicare? How about 70, when your social security benefits are maximized? Or maybe it’s 59 1/2 – that’s the age when you can tap into yours Retirement savings Without paying a fine?
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When it comes to retiring, there are no one-size-fits-all answers. You will need to make a thorough assessment of your circumstances. There are two main economic factors to consider: how much you will get from Social Security and how much you have in your nest egg.
What will be your Social Security benefits?
Social security Is a major component of most retirees ’incomes. This program is designed to replace the average person’s income up to 40% prior to retirement, but you can change significantly depending on the few years, including the age at which you decide to claim benefits.
If you haven’t done so yet, log in to your Social Security account www.ssa.gov To estimate how much you can expect at your full retirement age.
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You can choose to claim Social Security at age 62, age 70 or anywhere in between. But if you claim at any age other than your full retirement age (66 to 67, depending on the year you were born), your benefits will be more or less the same. Especially:
- If you claim for 36 months before reaching full retirement age, your benefits will be reduced by about 0.56% at the beginning of each month (6.67% per year).
- If you claim more than the initial month, your benefits will be as much as 20% less per year than this window.
- If you start your benefits after reaching full retirement age, your benefits will increase permanently by 8% for the year you choose to wait.
This is what it means here. Let’s say you were born in 1960 or later, which means your full Social Security retirement age is 67. If your full retirement benefit is $ 1,800 per month, your actual benefit could be as low as 2 1,260 if you claim 62, or if the age is as high as 2,232 if you wait until age 70. That’s a big range, so Social Security timing should be a factor when determining your ideal retirement age.
Will you have enough savings?
It is not necessary how much money you have in the bank, but it is important how much income you will have after you retire.
Retirement income usually comes from one of two sources, assuming you are not considering working part-time. The first is a fixed resource like Social Security and any pension you have. Then there are your savings, which will have to meet the rest of your needs.
Most retirement planners agree that in order to maintain the same standard of living you should expect about 80% of pre-retirement income. So, if you and your spouse earn $ 100,000, you will need about 000 80,000 in annual income after you retire. If you are getting 30 30,000 from Social Security, it will leave 000 50,000 which will need to come from savings.
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Using Admitted incomplete “4% rule” Retirement (which can be applied by multiplying your income requirement by 25), this means you will need કુલ 1.25 million in total retirement savings to withdraw so much and not worry about running out of money.
Keep in mind that you will not be able to access all your retirement savings if you retire early. With a 401 (k), If you quit your job, you can access your money penalty-free access after the age of 55, and with most other retirement accounts, the penalty-free withdrawal rate is 59 1/2.
Every situation is different
As a final thought, remember that every situation is different. These are not the only two factors you should use to determine your ideal retirement age. For example, if you retire before 65, you may need to figure out where your health care will come from. And if you plan to pay for your mortgage and car before you retire, you can earn less than 80% of your pre-retirement income. Thoroughly evaluate all factors before making a decision.
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