You would have heard people nowadays taking retirement at a very young age, then some people continue to work after crossing the age of 60 years! What’s the right age to retire? How to decide when to retire? Here’re some important aspects that can help you figure out the appropriate time to retire from your work.
When will you repay all your debt?
You should avoid getting retired if you have multiple debts to repay. Outstanding loans can take away a substantial portion of your post-retirement monthly income towards EMI payments. Also, you can’t step into a peaceful retirement with debt repayment hanging over your head. So, ascertain the remaining number of years to repay the existing loans and focus on retiring after that.
If you are simultaneously able to create a corpus which you think would help you service the debt repayment after your retirement, then you can also think of getting retired along with outstanding debt.
Till what age your children are expected to remain financially dependent on you?
Till your children are financially dependent on you, you can’t think of taking a retirement. You should take into account the number of years your children will take to become self-dependent and they get married. Once they become financially self-dependent, you can think of getting retired.
When will you have a sufficient corpus to meet post-retirement expenses?
There are several financial factors that you should keep in mind while accumulating your retirement corpus. You can’t think of getting retired unless you have sufficient corpus in hand to meet all your expenses. You should ascertain and list out all the short and long-term expenses that you will come across after your retirement. For example, your regular monthly expenses like electricity bills, mobile bills, home maintenance, medicine bill, travelling expenses, etc. should come into the short-term expenses category. Expenses like vacation, insurance premiums, etc. can be listed in the medium to long-term category. Also, include the fund requirement towards post-retirement short and long-term goals. You must ascertain the expected remaining life after you are retired and add all your expenses for that many years.
While calculating all your expenses, you must apply the expected inflation rate to ascertain the size of the fund you would require. Once you get the size of the corpus you would require to meet your retirement expenses, you can easily figure out how many years it will take you to build that corpus and retire from your work. Let’s check out illustration to know how monthly expenses may increase over a period of time after your retirement and accordingly you may require a bigger corpus to meet the expenses.
Finally, besides financial obligations and retirement corpus, you must also consider your health condition to figure out your retirement age. Assess any existing health conditions and evaluate whether you are physically and mentally prepared for the transition into retirement. If you are healthy, you can go as long as you want; on the other hand, if your health condition is not good, you may need a retirement in a shorter period.
It’s important to know that there is no one-size-fits-all answer to when to retire. It’s crucial to take into account your specific needs, priorities, and preferences and talk to your family member to make the right retirement decision.
The author is an Independent Financial Journalist