Whether you are in your late twenties, knocking on your mid-thirties door, or simply middle-aged, the thought of saving for your golden years can feel daunting. In today’s world, catching up with your finances can seem stressful. Inflation, health problems, unexpected life events, and financial hardships can greatly affect derailed retirement investing. Everyone wants to live their life to the fullest without worry. However, there are a few things to consider before retirement. It’s never too early to prepare—research now to safeguard your future.

What is retirement?

The act of retirement is where one chooses to leave their workforce behind and plans to depend on one or more sources of income. This typically includes certain investments and savings, pension, or Social Security benefits.

Before Retirement: Are You Qualified? 

According to the Michigan Office of Retirement Services (ORS), to qualify for retirement you must meet the minimum age and service requirements. For example, in Michigan, you can qualify for retirement at age 60 as long as you have about 10 years of service (YOS). Your eligibility also requires you to be 55 with at least 30 YOS you retire.

Regardless, if you are a judicial, unclassified legislative, or executive branch employee, you become vested for full retirement at age 60 with 5 YOS. Keep in mind that pensions are generally not transferable from state to state. Nonetheless, pension income is valid in the state of residency where it is received. If you retire early before age 60, your pension may be vastly reduced. 

Before Retirement: How Much Should You Save?

Based on the Employee Benefits Security Administration: United States Department of Labor (EBSA), only about 50% of Americans have estimated how much they need to save before retirement. Studies have also highlighted that the average American spends about 20 years in retirement. Therefore, make saving for retirement a priority. You will need 70 to 90 percent of your preretirement income saved to maintain a level of comfort once you discontinue working. Helpful ways to maximize your savings include: 

• Creating a strict budget
• Getting a 401 (k) match
• Opening an individual retirement account (IRA)
• Increasing your savings rate
• Catching up with contributions
• Investing in stocks
• Putting money into variable annuities
• Contributing to mutual funds

Before Retirement: How Will You Know the Timing Is Right?

The time at which you retire depends on a few different factors. It is important to be realistic about your retirement expectations. Once you land your career, start saving! Not everyone retires at the same time, and that’s okay. Retirement is highly dependent on your financial situation. Start thinking about the lifestyle you are capable of maintaining or if you can afford to retire. 

Before Retirement: Projected Earnings

According to the Social Security Administration (SSA), your benefits are based on your full earnings history. For example, your monthly benefit is estimated using your 35 highest-earning years. If you do not work for 35 years, your monthly benefit may be reduced as years with no earnings are factored in as zeros. 

Take into consideration, the longer you wait (up to age 70) to claim your retirement benefits, the higher your monthly payment will be for the rest of your life. Regardless, you can start to receive Social Security as early as age 62. If you are curious about what your Social Security benefit is at this stage in your life, you can view the influence of your starting age on your monthly benefits by using the estimator tool. Log in to your personal my Social Security account to access the Plan for Retirement section and get started. 

Before Retirement: Different Financial Professionals That Can Help

Although inflation and other lifestyle factors can significantly impact your ability to save, the type of investments you make plays a vital role in how much you’ll end up saving before retiring. Reaching out to a financial professional can help guide you through the process. Doing so can help you better understand how your savings or pension plan is invested. Different financial professionals to reach out to include: 

• Financial advisor
• Certified public accountant (CPA) or tax advisor
• Certified financial planner (CFP)
• Registered Investment Advisor (RIA)
• Retirement Income Specialist
• Social Security Advisor
• Insurance Agent or Annuity Specialist

What Happens If Your Claiming Circumstances Are Unique?

Everyone’s circumstances may be unique based on their age, health, and lifestyle factors. For example, say you are married and make more than your spouse. Perhaps your spouse has been unemployed for X amount of years. This may cause some level of concern for your loved one’s future. Take heart in knowing that your spouse may be eligible to receive Social Security benefits if you were married for 10 years or longer. You can earn up to 50% of your ex-spouse’s or current spouse’s benefit amount payable at full retirement age. 

Maybe you are worried about passing before your spouse does. Delaying your Social Security benefits can increase survivor benefits for your partner if you pass on. As a widow(er) or surviving divorced spouse, you may receive more Social Security benefits than an individual who did not lose their partner. 

Thinking Carefully Before Making a Decision

Knowing that saving is a critical component of retirement, as tempting as it may be, refrain from dipping into your retirement savings. According to the Internal Revenue Service (IRS), a retirement plan distribution is when one withdraws their money from their retirement savings plan. If you withdraw from your lifetime savings, this can result in financial penalties and tax consequences.  

If you withdraw from your IRA, 401(k)s, and other qualified retirement plans before the age of 65, you incur a 10% penalty on the amount withdrawn, on top of regular income tax. Equally significant, how you choose to save is just as important as how much you attempt to build. Additional things to consider before retirement include: 

• Income
• Taxes
• Personal care
• Assisted Living arrangements
• Personal savings
• Medical and Medical Insurance
• Dental
• Mortgage or rent payments
• Interest payments on other debt
• Charitable giving
• Entertainment and recreational activities
• Inheritance left behind for the family
• Travel