Is now the right time to retire?

If you’re planning to retire within the next few years, the uncertainty of 2020 may have you questioning whether that’s still the right decision or if delaying retirement might make better financial sense. Many people have had their job, investments or personal goals impacted this year, making now an ideal time to review your finances. Even if you haven’t, an annual review is a good way to make necessary adjustments to better position you to enjoy the retirement you’ve been dreaming of.

Consider the four factors below to help you determine if retiring sooner — or later — makes the most sense for you now.

Your employment status

If your monthly household income has dropped due to an unexpected pay cut, furlough or layoff, it might make sense to delay retirement. Working even a few more years could boost your future retirement income by giving your investments and savings more time to grow. You’ll also have more time to take advantage of any matching employer contributions to your company-sponsored retirement plan.

If you’re unable to find a job in your current field, consider a different industry or even part-time work. For example, turn a hobby or passion into a part-time job or small business, or become a consultant in your area of expertise. Get more ideas and tips about changing careers later in life link opens in a new window.

However, if you’ve lost your job and have enough retirement income and savings, it might make sense to move forward with your current retirement plans.

Anticipated retirement income

An unpredictable stock market and low interest rates means that the money in your retirement savings accounts may not be growing as fast as you anticipated. Now is a good time to talk to a financial advisor link opens in a new window and review the value of your investments, as well as your asset allocations.

If your savings aren’t on track to your goals, consider your timeline for retirement and make adjustments as needed, so you’ll have enough retirement income to draw from when you’re ready. You may want to consider other retirement income options link opens to a Commerce article page as well, like contributing to a Roth IRA to boost your retirement savings.

If you are planning to make monthly Social Security payments a significant part of your retirement income, it’s important to understand how the age when you begin collecting benefits impacts the amount of your monthly payment. Most people can collect Social Security benefits as early as age 62, but monthly benefits will be reduced if you claim before your full retirement age. Waiting a few more years to claim your benefits could result in thousands more in your pocket over time. Learn more about deciding when to file for Social Security benefits link opens in a new window.

On the other hand, if you’re unemployed and struggling to pay bills, it might make sense to claim Social Security benefits as soon as you’re eligible.

The CARES Act signed earlier in 2020 made three changes to the rules regarding retirement account loans and withdrawals link opens ina new window to the IRS website for people impacted financially or medically by COVID-19. These rules include doubling the amount someone can borrow from their 401(k) and allowing early hardship withdrawals up to $100,000 without penalty for those younger than 59-1/2. They also allow people to skip a required minimum distribution from a retirement account.

It can be tempting to borrow from your retirement savings. But before tapping your nest egg pre-retirement, be sure to consider other relief options you may be eligible for, like unemployment benefits or mortgage assistance programs link opens to a new tab.

Anticipated retirement budget

It can be helpful to review your current budget and create a mock future retirement budget to determine what, if any, adjustments you may need to start making now. Consider your retirement lifestyle, including where you want to live, hobbies and future travel plans. Will your retirement budget be enough to cover your anticipated lifestyle in both the short-term and the long-term? Examine how well your anticipated income and expenses align with your desired retirement lifestyle.

If you need to tweak your current budget to keep your retirement on track, start by taking some proactive steps now. Have you been spending less than usual this past year on dining out and entertainment? Put those extra funds toward paying down debt and increasing your emergency fund. Cancel any subscriptions or services you rarely use or can easily live without.

This can make it easier to manage your monthly living expenses once you retire — and prevent you from tapping your retirement accounts to pay for a surprise medical bill or home repair. Remember, any expenses that you trim now can free up more room in your future retirement budget.

Your health

Consider your overall health status and healthcare needs. If you retire before age 65, you may need to purchase health insurance or go on a spouse’s employer plan until you’re eligible for Medicare. It’s a good idea to review health insurance options and prices now to see how this factors into your retirement budget. You may also want to consider long-term care insurance link opens to a Commerce article page that covers care that Medicare and traditional health insurance plans do not.

By taking time to review your finances and make any necessary adjustments now, you can feel confident and more in control of your future plans as you transition into retirement. If you have questions or would like more information about retirement planning, contact one of our financial advisors link opens in a new window.

Explore more articles:

• How to make the most of your Social Security benefits link opens to a Commerce article page
• How to plan for the retirement you really want link opens to a Commerce article page