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Key Factors to Determine Your Time Horizon for Retirement Planning

Retirement can bring immense peace of mind and contentment into your life. But, retiring without adequate planning can to lead a stressful life. Planning for finances and asset generation is important, as it paves the way for a smooth and safe retirement. Moreover, in order to economically secure your post-retirement life, you need to choose the right time to plan. Here are some noteworthy facets to help you determine the most preferable time period in which you should start planning for retirement:

Key factors

When you plan for retirement, you need to make assumptions about the future. The input here decides the outputs that you will get after you retire. It is important to understand that evaluation and analysis form an important part of retirement planning. And to evaluate the right time to plan, you need to know the key factors to assume. In today’s world, life expectancy has substantially increased thanks to modern medical science. The main variables of assumption include age, life expectancy, withdrawal rates, inflation, and the rate of return. When you start understanding your retirement plan, you will need to spend more time factoring these aspects and making calculations on the basis of them. These factors determine the right time to start planning and the key assumptions can be used to create a plan with the help of various calculators available online.

Current and retirement age

One can start planning for retirement as soon as the age of 25. This gives your assets more time to mature and get converted into huge capital investments, if you plan to retire at 65. If you start planning at the age of 50, you won’t have much time to act on your plan or to rectify the mistakes you have done in the past. The longer the gap between your age and the age of retirement, the lower levels of risk tolerance your portfolio will have. Also, when you plan in a younger phase of life, you have time to deal with volatile assets such as bonds or stocks. You can easily bounce back in case of losses with ample time to reflect on your mistakes.

Early retirement

The idea of FIRE, Financial Independence Retire Early, has caught the attention of many people around the world. However, early retirement means that you have to work twice as hard in order to build your retirement corpus in just a few years. This can be an extreme lifestyle for some people and can entail living a frugal, minimalistic life. If you wish to retire early you will have to drastically cut down your expenses, extend your working hours, and ensure reaching your savings goal in half the time as others.

Limited time on your hands

If you fail to plan at the right phase of life, you can still make your efforts count. The trick here is to create a portfolio that is focused more on capital preservation and monthly income. This process will include a strategy with higher securities allocation. You may also include bonds that are less risky and provide a low yet assured monthly income. The process will also outrun the risks of inflation. This is because since the years left to retire are less, you won’t see a much steeper graph of inflation in such a short time.

So when do you retire?

Here are some aspects to factor in so that you can estimate the right time to retire:

Bank account

In the absence of a monthly salary paycheck, it becomes paramount to have enough savings. A general rule is to calculate if your retirement savings are 20% of the annual withdrawal rate. If you are not there yet, you should find out ways to save more and spend less.


Nothing seems unachievable when your health starts to deteriorate. Regardless of your age, some health issues might urge you to pre-pone retirement. Alternatively, you may plan to retire at a later stage in life if you are fit and healthy. Health plays an important role in your decision to retire. You should also look into your healthcare and insurance plans to cover medical expenses after retirement.

Your partner’s mindset

Your spouse might want to see you playing with your grandchildren every day while you are ambitious for a part-time job. You should sort out your differences before taking a decision. Sometimes, couples share different retirement plans and goals. Try to get on the same page on as many aspects as you can or find ways to incorporate your spouse’s goals in your plans.

Wish list

Retirement is that phase of life when you live for yourself and consider fulfilling your lifelong dreams. You should ask yourself if you have the courage and financial stability to aspire for them yet. Knowing the answer will give you a purpose to look forward to after retirement. Making a list of things you wish to do after retirement can also help you ascertain your financial standing. Retiring as a means to escape the challenges of life can seem like a good idea. However, without sufficient funds this golden phase can easily turn into a daunting time.

Social security

Social security works against the notion of early retirement and helps one understand benefits of retiring late. If you are born after 1943, you can get as high as an 8% increase in the claim benefits from social security funds. You can extend the date until you are 70 years old to gather maximum benefits.

To sum it up

Deciding the time to retire can be a complex step in a person’s life. But if you are certain about your goals and objectives, you can make a sound decision at the right time. Everyone has to go through retirement at some point in life, but the right timing is what makes the difference.

Are you unsure about when to retire? Financial Advisor can help you out by looking at your portfolio and devising the right time frame to retire with maximum potential benefits.

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