Your best advice: should I retire this year or next year?

In My Humble Opinion
1

I will be 65 at the end of August. I have been planning on retiring as of the end of August next year (69.5 weeks to go!), when I am 66, as Social Security recommends. Now I am considering retiring this year instead.

What I lose:

about $300 a month reduction in Social Security and pension for the rest of my life.

medical insurance coverage for me and my partner (but we both will qualify for Medicare; but we’ll probably have to pay for supplemental insurance; but I already pay some for my partner’s coverage on my plan.)

a job which is interesting some of the time at least, and is never awful. Really, I work in a very good place. The worst I am sometimes is bored.

A smart phone paid for by the company (I don’t have a personal one at this time). Replacing that will cost maybe $300 for the phone and $35/month for Virgin Mobile.

What I gain:

A year of my life in which I can do what I want instead of going to work for 40 hours a week.

Let me repeat that:

A year of my life in which I can do what I want instead of going to work for 40 hours a week.

It’s not even that I have specific things that I am burning to do. I would love to explore all the hiking trails in the SF bay area. I would love to have time to really devote to physical fitness instead of going to the gym when I can and trying not to be too tired to go or to do a full workout. I would love to be able to devote time to gardening and to do something spectacular with our tiny (25’ x 40’) back garden. I would love to spend an hour every day in my reading corner without feeling like there are other things I should be doing.

My older sister retired last year, and when I asked her about a year afterwards what it was like, she said it was like getting out of jail. And she loved her job! But she loves doing what she is doing now much more.

This question came about because I have always assumed that I had to wait until I was 66 because it would cost me too much money; then I ran the actual numbers. It’s not great to lose $3600/year (gross) but it is do-able in my circumstances.

I don’t want to make a decision (either way) that I will regret later. I’m nervous in any case about living on a fixed income, but I haven’t had a raise in 7 years due to industry conditions, and I haven’t noticed the difference all that much. One year one way or the other won’t make much difference there, I’ll just start out $3600/year ahead if I wait. I don’t plan on working at something else after I retire, if I was going to work I would be better off staying here.

So, please, give me your best and most considered advice. I don’t promise to follow it, but I do promise to read what you say and to consider it. I am especially interested to know what things I may have missed in my pro/con list.

2

One important question is: what’s your best guess as to your life expectancy? The real tradeoff is that extra $3600/year from Social Security v. one extra year of freedom. If you don’t expect to see 80, you want the year. If you expect to make it into your 90s, then the argument for working one more year is a lot stronger; those annual $3600s will start to add up.

3

There are no guarantees. You might get hit by a bus tomorrow. Imho, the only decision here is would you rather have the year off when you’re 65 or when you’re 85? To me, you’re gambling that somehow, that year at 85 is better than this year at 65. To me, I can’t possibly imagine how having an extra year later is better than having that year now.

4

And I think Social Security’s recommendations should be taken with a grain of salt. The one time I actually looked at what I’d be getting if I retired at different times, I noticed that if you added how much you get each year if you retired at 62 - the earliest you can get partial Social Security benefits - versus retiring at some later age, you were still getting more money overall from Social Security if you retired at 62 unless you lived to at least 79, I think it was.

And that was without factoring in present value, and without putting a price on the rather enormous benefit of retiring earlier.

5

Do you have enough savings to retire at 65, when you are eligible for Medicare, and postpone drawing Social Security until you are 66? That is my plan, but I am only 60 so it is a ways off still.

6

This was my calculation too.

I took SS at 63 on a bet that the money I could leave in my IRA would grow faster than the delayed SS. Two years in it was a great bet and I don’t regret it. By the time I hit the break-even date in my mid to late 70s, I doubt I will even miss the extra money I could have had from waiting for SS.

I actually retired after being laid off at 60 and can no longer imagine working, it is great. Pre-ACA healthcare was a pain but I am now on Medicare with a high deductible Medigap F plan that costs me $70/month. I don’t worry about extreme healthcare costs leaving me broke.

7

No, I don’t have that option.

8

Part of the equation, which I didn’t see anyone else touch on, is how much savings do you have, and do you have other pension/IRA/401k money? You are concentrating on SS, which is important, but if you have plenty of other “retirement” assets and income, then taking SS a year before your “full” retirement age might not be a bad decision.

If, however, that $3,600 a year will be fairly important in regards to your quality of life, then you should perhaps keep working. If you retire a year early, not only do you collect less SS, but you lose one year of income generation and retirement savings.

Finally, just because someone retires, doesn’t mean they have to start drawing SS. Some people with plenty of retirement assets and/or a pension retire years before they apply for SS. There are lots of moving parts in retirement, and you have to look at the entire picture.

9

I would work one more year. The benefits seem worth it.

10

I appreciate your point of view, even though it seems to be belied by your user name. :smiley:

11

Yes. Not to reveal too much to a bunch of online strangers, but I will have a substantial pension (of which I will lose a small fraction if I leave one year before I planned, due to having one fewer year in the calculation) and a reasonable 401(k). My investment broker’s retirement estimator tool says I will have “plenty” of money either way, compared to how much they say I’ll “need”. They don’t live in San Francisco. By the way, the $3600 reduction counts both Social Security and the pension reduction.

Which brings up another factor: I want to stay in my house, which is nowhere near paid for. I can afford the mortgage now with reasonable comfort. One of my fears is that inflation will make that harder on a fixed income, but it might also be possible to re-finance at that point to get lower payments, or even consider a reverse mortgage (I know, I know). I don’t care about leaving a paid-for house for someone else to sell and enjoy, I don’t have any children, and my partner is older than me.

12

I wish I had spent more time working was said by nobody on their death bed.

13

I can understand why you are agonizing over the decision, or if “agonizing” is too strong a word, at least worrying about it. It’s a very difficult and important decision. Frankly, it sounds like you can go either way.

As for the house, SF is such an expensive area in regards to housing, you always have the option to sell your house (presumably for a lot of money) and buy in an area that has lower housing costs. After you quit working, at some point you may find you want to live somewhere cheaper. Not right away, of course, but my point is you aren’t tied to your current house forever. One of the nice things about working and living in a high-cost area is moving someplace cheaper makes your money go farther. It’s much harder to retire from a low-cost area to a high-cost one.

14

Because it’s such a finite term, I think I would hang on for one more year. If it were a matter of just “every day I stick around is more money I will have so I need to pick a date” I’d say just close your eyes and pick one. But when you have a specific goal date, I think it’s much easier to plan for it and get through the year leading up to it.

For some people (depends on how your brain operates) maybe should be making a fun plan for when you do retire. Something really fun that you can really look forward to and that you’ll pay for with the additional first year retired money. In other words, “I’m retiring in a year and that will earn me 3600 that I will spend on a cruise to Alaska. I am buying my Alaska cruise by putting up with this minor nonsense today.”

Having a specific goal can help a lot.

But, I am risk-averse, and that plays into my thinking.

15

Can you split the difference and work half a year? That way you won’t be second guessing yourself over losing a whole year’s worth of benefits or the other way around regretting the loss of a whole year of life. So that cuts the second guessing in half.

16

It gets down to $300 a month and some insurance costs. When you are retired an extra $300 a month is a nice bonus. But I’d take the freedom. I miss it, haven’t had enough for a long time now, and I may not live long.

Your approach might be this. Plan to keep on working. You can always quit if it doesn’t seem worth it.

17

This is how my 65/66 plan (mentioned above) works for me. I will withdraw extra money from my 401(k) in the first year of my retirement, then reduce the withdrawals when I start drawing Social Security at 66.

18

Understood, and that is an option except that I don’t want to do that. I want to reserve as much of that money as I can in case inflation gets worse later and I need to start drawing it down faster. If I take a chunk out up front, that’s gone forever. I don’t think it’s a good trade-off for the $200 per month or so more I will get for Social Security.

Some very good thoughts and ideas here, and I really appreciate it. They are all percolating in my brain. Plus, once I have made a decision, I will come back to this thread and read everything again, just to make sure.

19

Is there anyway you could go part time at work for that final year without it affecting your pension?

20

Unless you die a year after retiring, you’re going to get that first year of being retired!!! either way. The extra year will likely be a routine year in the middle, between when you’re first retired and when you start heading downhill.

Just something to consider.