When should I retire? 8 things to consider

Throughout our lives, we hear about retirement. For many of us, it can feel like a far-away concept—something we know we should plan for, even if it’s decades away. When to retire is your decision, and many prospective retirees start preparing as soon as possible. Having a target or deadline can be helpful as a way to focus and evaluate your progress.

Wondering when you should retire? Consider your life goals and circumstances.

This way you can determine where you’re at and where you’d like to go. Prospective retirees may find it helpful to consult a financial advisor for more customized planning to help flesh out the details and potentially explore various scenarios.

It may be helpful to consider the following factors:

People tend to increase their earning potential as they gain experience, develop valuable skills and advance in their careers. That’s why most retirement calculators will assume a salary increase of 2% to 3% each year to help project how much you can expect to have saved for retirement over time.

Of course, not everyone’s income will follow such a predictable pattern, and may change based on experience and promotions.

For example, if your career pays well early on, you might be able to retire early. If you work in a field where your salary grows incrementally, a more traditional retirement in your 60s might be more realistic.

Some occupations are more physically demanding than others, so you may want to retire earlier, which could require more aggressive saving.

On the other hand, you might love your job and be able to continue doing it into your golden years. If that’s the case, you might be able to cut back hours or become a consultant after you reach retirement age. Most retirement calculators will allow you to factor in any additional income you expect to earn in retirement. That way, you can see how that extra money will strengthen your financial security in retirement. 

Money isn’t the only reason some people continue working. If your identity is connected closely to your work, be sure you know what you want to do in retirement, so you don’t give up a good career to be bored.

No two retirements are the same. Before asking yourself, “When should I retire?” it is helpful to determine what kind of retirement you want and how much it will cost. If you’re planning extensive luxury travel or want to pursue expensive hobbies, you may need to save more.

As you’re estimating retirement expenses, your lifestyle can influence your answer. You may want to factor in these decisions:

• Where do I want to live in retirement?
• How much do I like to shop, dine out and travel? 
• Will I downsize my home?

A common guideline is to expect spending 70% of your pre-retirement income while in retirement. However, that might be too much or too little to accommodate the retirement lifestyle you’re imagining for yourself. Retirement calculators can help you to determine how modest or extravagant of a lifestyle you’ll have.

If a carefree retirement is your goal, then don’t let outstanding debt put a damper on it. It may be helpful to pay off any debt before you retire. If you have any outstanding student loans, credit card debt or a mortgage, you may also want to pay these down ahead of your target retirement date.

Doing so can help you reduce your retirement expenses and allow you to be more flexible with your lifestyle. 

Your savings rate is the percentage of your income before taxes that you’re able to save each month. The higher your savings rate, the sooner you may be able to retire.

Your savings rate can include the money that flows into all your savings and investment accounts, which can include your 401(k), any individual retirement accounts (IRAs), and other investment and savings accounts such as a Capital One 360 Performance Savings account.

Many retirement calculators will automatically peg your savings rate at 10% of your pre-tax monthly income. But you can typically adjust that number to more closely align with your actual savings rate.

While you might have your sights set on when to retire, life can be filled with other savings goals. Weddings, children’s education, travel, caregiving expenses—they can all add up and divert money from your retirement.

What other goals would you like to achieve on the road to retirement? Many prospective retirees list out these major goals and estimate their costs so they are accounted for as part of their retirement plan.

As you age, health risks (and costs) tend to go up, so it’s important to have money reserved for healthcare expenses.

Retirees under the age of 65 often have to purchase private health insurance if there aren’t coverage options available through the retiree’s spouse or employer.

Keep in mind that health expenses don’t end when you turn 65. Because Medicare may not cover everything, many retirees purchase supplementary insurance to close the gap and set aside a portion of their pre-retirement savings for healthcare.

Your Social Security benefit will depend on how much you and your spouse make over the years, as well as when you decide to retire.

Most retirement calculators allow you to factor in your expected monthly Social Security benefit.

Retirement planning involves more than choosing a date on the calendar. Your finances, lifestyle and personal goals may all play a role in determining when you may be ready to retire. 

As you consider the question, “When should I retire?” you may want to:

• Use a retirement calculator to test different retirement dates, savings rates and income scenarios before settling on a plan.
• Revisit your retirement plan regularly as your expenses, savings and personal priorities change over time.
• Give yourself room to adjust your timeline if your financial picture changes or your retirement goals evolve.

While you work toward your retirement goals, building a strong foundation with the right financial tools can help you prepare for the years ahead. The good news: You can open a Capital One 360 Checking or 360 Performance Savings account online in about 5 minutes.