The traditional timeline and image of retiring is changing. MetLife’s 2020 study, "Building Employee Financial Security in Uncertain Times," found that only a slight majority (54 percent) of employees are on track to reach their retirement savings goals. Plus, the COVID-19 pandemic has added more economic uncertainty.
With that in mind, you may be wondering when you can retire and how your retirement will look. Here are five things to consider, as you prepare for the future.
1. The age that people retire is rising
Although other people's retirement age doesn't dictate when you might be able to retire, there's a clear trend in people continuing to work later in life. The motivation or necessity for continuing to work often comes down to financial or social needs, or a combination of the two.
While the average retirement age as of 2018 was 61, according to Gallup data, MetLife's 2020 Evolving Retirement Model Study found the average retirement age is expected to rise. The study revealed that most workers (81 percent) delay retirement due to finances, either to build more savings (45 percent) or because they can't afford to retire (42 percent).
On the other hand, nearly a quarter of people delay retirement because they enjoy the mental stimulation of work. And, nearly half of people (45 percent) are interested in returning to work after retiring.
2. How much you’ll need to save
There’s no one-size-fits-all answer to how much you need to save to retire. The answer depends on your anticipated retirement income, which can come from savings, investments, employer benefits, and Social Security. Equally important is understanding your household expenses overall. You can start by asking yourself a few important questions:
- When do you want to retire?
- How much retirement income will you need to cover your anticipated expenses and desired lifestyle?
- Do you want to stop working completely?
- Do you have enough retirement savings to meet your needs and goals?
- Are there any actions you can take right now to save more?
These aren’t necessarily easy questions to answer on your own, particularly when it comes to projecting your future finances. Try using a free retirement calculator online. Or, you can work with a financial advisor to get a better sense of your retirement readiness. The goal is to give yourself a sense of how your finances align with your goals, empowering you to make decisions based on realistic numbers rather than rough guesses.
3. When you'll start collecting Social Security
Social Security income is an important part of many people’s retirement plans and deciding when you should start collecting benefits can be a big decision. While the earliest option is when you’re 62 years old, you’ll get a larger benefit the longer you wait (up until age 70).
Again, working with a financial advisor may be a good idea to eliminate the guesswork. But if you want to do research on your own, Social Security calculators can help you see how different start dates can impact your finances.
4. Your healthcare plan
Figuring out how you’ll cover medical expenses and long-term care is another important consideration that will play into your financial projections. Once you’re 65, you can sign up for Medicare, the U.S. federal health insurance program available to certain eligible groups. However, you may also want to buy supplemental health coverage or need to budget for premiums and out-of-pocket costs.
Some estimates suggest that a couple who retires at 65 will still have several hundred thousand dollars in future healthcare and long-term care expenses. And, if you want to retire before you qualify for Medicare, you’ll need a plan for healthcare coverage in the interim.
5. Retirement means something different for everyone
MetLife’s 2020 Evolving Retirement Model Study found that most employers (54 percent), nearly half of workers (43 percent), and 29 percent of retirees think the definition of retirement should change.
Today’s retirement might look more like a gradual transition than a firm break between work and non-work. In fact, most workers (79 percent) would be interested in a phased-retirement program. Perhaps that means taking on a part-time or flexible schedule or exploring consulting work. You may find this to be an appealing option, if you enjoy working and want to stay connected professionally.
As our vision for retirement evolves, you have a lot to consider and ask yourself. Another twist is how the pandemic has led to the rise in work-from-home jobs—a trend that may persist after offices reopen. With this in mind, whether you need or want to work, you may be able to choose from a wider range of opportunities.