generic Your Two Most Important Retirement Decisions
There’s no denying that you’ll have to make plenty of decisions about your retirement over the course of your life. However, if you’re looking to simplify things, there are actually two decisions that rank as the most important.
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This is particularly true in light of the fact that most retirees won’t have as much saved up as they might like by the time they reach age 65. To help build and stretch this money, it might help to focus on the two most important retirement planning decisions to help give yourself a leg up by the time you retire.
Age
Age is a critical determinant in how successful your retirement will be. For one thing, the later you retire, the more time you’ll have to save and invest your money. But perhaps equally important, the longer you work, the less time your money will actually have to last in retirement.
For example, if you retire at age 70 with $1 million, that money may have to last you just 20 years. But, if you retire at age 50, you’ll likely need to cover expenses for at least 40 years — and you’ll have 20 fewer years to save up that money.
Age also plays a big role in terms of your Social Security strategy. Although you can file for Social Security benefits as early as age 62, if you can wait until age 70, you’ll bump your check up by 75% or more per month, which is a significant raise.
If those percentages don’t sound like much, take a look at some sample numbers. If you earn a $2,000 monthly benefit at age 62, you might instead draw $3,500 at age 70. That amounts to an annual amount of $42,000 vs. $24,000, an additional $18,000 per year.
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Your Lifestyle
Your retirement lifestyle is equally important to your age in terms of how successful your retirement will be. For example, if you plan to completely retire and shut off all forms of workplace income, you’ll have to rely completely on your retirement savings, pensions and Social Security to fund your lifestyle. If you instead choose to continue working on a part-time basis, run a small business or even take a side gig, you can make your retirement savings last years longer.
The same is true in terms of how extravagant you wish your retirement to be. If you view retirement as a slimmed-down version of your working life, in which you spend more time at home with friends and family and stop going out as much, your retirement savings will last much longer. But if your vision of retirement is round-the-world cruises, dining out at the finest restaurants and treating friends and family to lavish gifts, you may have to rethink your retirement savings strategy.
The Bottom Line
There are a lot of moving parts when it comes to a successful retirement. But, at the end of the day, it’s your income and your expenses that are going to determine the structure and quality of your retirement lifestyle.
This makes the age at which you retire a critical decision, as it determines the time you have to earn and the time over which you will be spending your retirement savings — as well as how much you’ll receive in Social Security benefits.
On the expense side of the ledger, it’s your lifestyle choices that have the biggest impact. Taken together, these are the most important contributors to the quality of your retirement.
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This article originally appeared on GOBankingRates.com: Your Two Most Important Retirement Decisions
