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 the additional income needed to obtain 80% of your pre-retirement salary if you retire in 2026 at full retirement age. It also shows the investment assets needed to generate this additional income. Annual Social Security benefits are calculated based on $50,602.80 received in 2026 for maximum contributors. Calculations assume no other income, no debt, you earn 4% on your investments, and you withdraw investment earnings to help fund your retirement. The table shows that you will need investment assets of $788,595 to $2,534,930 depending on your pre-retirement salary. (Note that social security benefits are approximate.)

Annual Salary	80% of Salary	Social Security	Additional Needed	Required Investment Assets
$60,000	48,000	16,456	31,544	788,595
$70,000	56,000	19,199	36,801	920,028
$80,000	64,000	21,942	42,058	1,051,460
$90,000	72,000	24,684	47,316	1,182,893
$100,000	80,000	27,427	52,573	1,314,325
$110,000	88,000	30,170	57,830	1,445,758
$120,000	96,000	32,912	63,088	1,577,190
$130,000	104,000	35,655	68,345	1,708,623
$140,000	112,000	38.398	73,602	1,840,055
$150,000	120,000	41,140	78,860	1,971,488
$160,000	128,000	43,883	84,117	2,102,920
$170,000	136,000	46,626	89,374	2,234,353
$180,000	144,000	49,369	94,631	2,365,785
$190,000	152,000	50,603	101,397	2,534,930

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.

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 2026, and you retire in December 2031 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 increasing your investment by $3,000 each year until retirement,
Your annual expense budget is $90,000 in your first year of retirement and cost of living grows by 3% a year,
The average Social Security Benefit in 2026 is $2,086, and the benefit grows at 2.0% per year to $2,349.17 in 2032,
You start collecting Social Security and a company pension ($2,500/mo.) in January 2032,
Annual portfolio growth is 6.0%, and Social Security increases by 2.0% 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 your 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 9 years of retirement. Afterwards, starting at age 72, retirement assets reduce each year by an increasing greater amount. The good news in this example is that you will not run out of money until you reach the age of 90. As you approach this age, you need to start cutting back on spending.

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.
2026	57					500,000	30,000	10,000
2027	58					540,000	32,400	13,000
2028	59					585,400	35,124	16,000
2029	60					636,524	38,191	19,000
2030	61					693,715	41,623	22,000
2031	62					757,338	45,440	25,000
Retirement
2032	63	$90,000	$28,190	$30,000	$31,810	795,969	47,758
2033	64	92,700	28,754	30,000	33,946	809,781	48,587
2034	65	95,481	29,329	30,000	36,152	822,216	49,333
2035	66	98,345	29,916	30,000	38,430	833,119	49,987
2036	67	101,296	30,514	30,000	40,782	842,324	50,539
2037	68	104,335	31,124	30,000	43,211	849,653	50,979
2038	69	107,465	31,747	30,000	45,718	854,914	51,295
2039	70	110,689	32,382	30,000	48,307	857,902	51,474
2040	71	114,009	33,029	30,000	50,980	858,396	51,504
2041	72	117,430	33,690	30,000	53,740	856,160	51,370
2042	73	120,952	34,364	30,000	56,589	850,940	51,056
2043	74	124,581	35,051	30,000	59,530	842,466	50,548
2044	75	128,318	35,752	30,000	62,567	830,448	49,827
2045	76	132,168	36,467	30,000	65,701	814,574	48,874
2046	77	136,133	37,196	30,000	68,937	794,511	47,671
2047	78	140,217	37,940	30,000	72,277	769,905	46,194
2048	79	144,424	38,699	30,000	75,725	740,375	44,422
2049	80	148,756	39,473	30,000	79,283	705,514	42,331
2050	81	153,219	40,262	30,000	82,957	664,888	39,893
2051	82	157,816	41,068	30,000	86,748	618,033	37,082
2052	83	162,550	41,889	30,000	90,661	564,454	33,867
2053	84	167,427	42,727	30,000	94,700	503,622	30,217
2054	85	172,449	43,581	30,000	98,868	434,971	26,098
2055	86	177,623	44,453	30,000	103,170	357,900	21,474
2056	87	182,951	45,342	30,000	107,609	271,764	16,306
2057	88	188,440	46,249	30,000	112,191	175,879	10,553
2058	89	194,093	47,174	30,000	116,919	69,512	4,171
2059	90	199,916	48,117	30,000	121,799	-----	0

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