Retirement Timing

Previous pages of this Retirement Planning Section presented information on Setting Retirement Goals, Establishing a Retirement Budget, Saving for Retirement, and utilizing a Pre-Retirement Checklist. Armed with retirement goals, knowledge of your Net Worth (from the Retirement Savings page), a retirement expense budget, and a pre-retirement checklist, you are now in a position to calculate when you’ll be able to retire and/or how much financial flexibility you’ll have in retirement.

Before creating a tentative Retirement Financial Plan and seeing if it works, you'll need to consider a major factor in the plan -- how long you’ll let your Social Security benefits grow until you elect to start receiving them. The longer you wait, the higher your monthly benefits. Many people elect to start receiving Social Security benefits at their full retirement age, but others start receiving benefits at age 62 (early retirement age) and pay the price of reduced income.

The following table illustrates Social Security benefit reductions at age 62 based on your birth year:

Year of Birth	Full (normal) Retirement Age	Months Between Age 62 & Full Retirement Age	At Age 62 a $1000 Retirement Benefit Would be Reduced to	The Retirement Benefit is Reduced By
1943-1954	66	48	$750	25.00%
1955	66 and 2 months	50	$741	25.83%
1956	66 and 4 months	52	$733	26.67%
1957	66 and 6 months	54	$725	27.50%
1958	66 and 8 months	56	$716	28.33%
1959	66 and 10 months	58	$708	29.17%
1960 and later	67	60	$700	30.00%

If you were born on January 1^st, you should refer to the previous year.
If you were born on the 1^st of the month, the benefit is figured as if your birthday was in the previous month. You must be at least 62 for the entire month to receive benefits.
Percentages are approximate due to rounding.

A frequently asked question is "How much investment assets will I need to retire?" There is no simple answer to this question since the answer is determined by:

What percent of your pre-retirement salary will you need?
When do you plan to begin receiving social security benefits?
Do you have other income such as pensions, dividends, annuities, rental income, etc.?
How are your assets invested?
Are you retiring with debt, such as a mortgage, car loan, etc.?

The table below shows that if you need 80% of your salary in retirement, retire in 2024 with a full social security benefit ($45,864 in 2024), have no other income, have no debt, earn 4% on your investments and withdraw investment earnings to help fund your retirement, you will need investment assets of $53,400 to $1,853,400 depending on your pre-retirement salary. (This does not account for increasing retirement salary requirements due to inflation.)

Annual Salary	80% of Salary	Social Security	Additional Needed	Required Investment Assets
$60,000	48,000	45,864	2,136	53,400
$70,000	56,000	45,864	10,136	253,400
$80,000	64,000	45,864	18,136	453,400
$90,000	72,000	45,864	26,136	653,400
$100,000	80,000	45,864	34,136	853,400
$110,000	88,000	45,864	42,136	1,053,400
$120,000	96,000	45,864	50,136	1,253,400
$130,000	104,000	45,864	58,136	1,453,400
$140,000	112,000	45,864	66,136	1,653,400
$150,000	120,000	45,864	74,136	1,853,400

The Investing Section will help you determine how much you'll need to invest while still working to build your retirement nest egg. It assumes 50% income requirement and 6% investment growth instead of the 4% assumed here.

With your annual expense budget (calculated from the "Retirement Budget" section), you’re now in position to determine if/when you’ll have sufficient income to retire. This is a matter of determining when your regular retirement income sources plus investment drawdowns will meet your retirement budget over your projected lifespan. To perform this calculation, you’ll need to make several assumptions regarding your retirement age, investment portfolio contributions prior to retirement, income needed in your first year of retirement, average annual cost-of-living (COL) increases, and annual portfolio investment growth. This exercise will tell you whether you will have sufficient income to meet your retirement expenses and whether will run out of money in retirement based upon your lifespan.

Let's assume that you are 57 years old in 2024 and considering retiring at age 62. Following is a simple table (Retirement Financial Plan) that projects your ability to retire in 5 years based on these assumptions:

You are 57 years old in 2024,
You retire in December 2029 at age 62 (early retirement).
You have $500.000 in Retirement Assets and continue to save while working, investing an additional $10,000 this year and $3,000 each year until retirement.
Your annual expense budget is $85,000 in your first year of retirement and cost of living grows by 3% a year,
You start collecting Social Security ($2,000/mo.) and a company pension ($2,500/mo.) in January 2030,
Annual portfolio growth is 6%, and SS increases by 2% each year.

You will be building your assets prior to the start of retirement and drawing down your assets each year in retirement to meet income shortfall. Your income (SS & Pension) plus Portfolio Drawdowns will be used to cover Expenses. When you reach the age of 73, your asset drawdown from any IRA investment funds will be influenced by Required Minimum Distributions (RMDs) which are not reflected in this example. See "Investment Income".

Note that in the example below, portfolio growth exceeds investment drawdown in the first 11 years of retirement. Afterwards, starting at age 74, retirement assets reduce each year by an increasing greater amount. The good news in this example is that at age 90, the retiree will still have almost half of his/her retirement nest egg.

Taxable Income Required			Retirement Income Sources			Retirement Assets
Year	Age	Expenses (3.0% inf.)	Social Security (2.0% inf.)	Pension Income	Shortage (Portfoio Drawdown)	Assets	Growth @ 6.0%	Addit'l Invest.
2024	57					500,000	30,000	10,000
2025	58					540,000	32,400	13,000
2026	59					585,400	35,124	16,000
2027	60					636,524	38,191	19,000
2028	61					693,715	41,623	22,000
2029	62					757,338	45,440	25,000
Retirement
2030	63	85,000	$24,000	$30,000	31,000	827,779	49,667
2031	64	87,550	24,480	30,000	33,070	846,445	50,787
2032	65	90,177	24,970	30,000	35,207	864,162	51,850
2033	66	92,882	25,469	30,000	37,413	880,805	52,848
2034	67	95,668	25,978	30,000	39,690	896,240	53,774
2035	68	98,538	26,498	30,000	42,040	910,325	54,619
2036	69	101,494	27,028	30,000	44,467	922,904	55,374
2037	70	104,539	27,568	30,000	46,971	933,812	56,029
2038	71	107,675	28,120	30,000	49,556	942,870	56,572
2039	72	110,906	28,682	30,000	52,223	949,886	56,993
2040	73	114,233	29,256	30,000	54,977	954,656	57,279
2041	74	117,660	29,841	30,000	57,819	956,958	57,417
2042	75	121,190	30,438	30,000	60,752	956,557	57,393
2043	76	124,825	31,047	30,000	63,779	953,198	57,192
2044	77	128,570	31,667	30,000	66,903	946,612	56,797
2045	78	132,427	32,301	30,000	70,126	936,506	56,190
2046	79	136,400	32,947	30,000	73,453	922,570	55,354
2047	80	140,492	33,606	30,000	76,886	904,470	54,268
2048	81	144,707	34,278	30,000	80,429	881,852	52,911
2049	82	149,048	34,963	30,000	84,085	854,335	51,260
2050	83	153,519	35,663	30,000	87,857	821,510	49,291
2051	84	158,125	36,376	30,000	91,749	782,944	46,977
2052	85	162,869	37,104	30,000	95,765	738,172	44,290
2053	86	167,755	37,846	30,000	99,909	686,697	41,202
2054	87	172,787	38,602	30,000	104,185	627,989	37,679
2056	88	177,971	39,375	30,000	108,597	561,484	33,689
2057	89	183,310	40,162	30,000	113,148	486,576	29,195
2058	90	188,810	40,965	30,000	117,844	402,622	24,157

Timing is not everything, it's the only thing!

When to Retire

Social Security Benefit Reduction

Investment Nest Egg Rules of Thumb

Retirement Financial Plan

Retirement Assets Drawdown to cover Cost of Living