Retirement brings with it rewards and challenges.
Retirement generally refers to the time of your life when you cease to work for yourself or an employer. If you haven’t reached retirement yet, you may not be aware of all the benefits of retirement and the accompanying challenges. A few facts might prove helpful as you approach or plan for retirement.
Voluntary and Involuntary
Voluntary retirement is a personal choice to stop working. It is not compulsory, although factors such as health may contribute to your choice.
Involuntary retirement is forced or compulsory retirement when you want to keep working. Often a company will offer a buyout—an involuntary retirement package—if the company needs to downsize. About 30 percent of individuals have this type of retirement, according to findings of a study published on the website of Ohio State University’s John Glenn School of Public Affairs.
In the United States, your year of birth determines the exact age you must be to receive full retirement benefits from the Social Security Administration. As of 2010, people born in 1937 or earlier may receive full benefits at age 65. Those born in 1938, 1939, 1940, 1941 and 1942 may retire with full benefits at age 65 plus two, four, six, eight or 10 months, respectively. Those born between 1943 and 1959 must wait until they turn 66, and if you were born in 1960 or later, you must wait until you turn 67.
If you opt for early retirement, or if you must take a retirement buyout, you will not receive as much in benefits from your employer as you will if you work until normal retirement age as determined by your employer. This is because employers determine your benefits based on your years of service.
Although the normal retirement age as it relates to Social Security benefits is between 65 and 67, the Social Security Administration permits people to start drawing benefits as early as age 62. Social Security benefits are based on lifetime earnings, so taking early retirement will lower the amount of benefits you receive. For example, if you were born between 1943 and 1954 and retire at 62, your benefits will be 25 percent lower than if you waited until full retirement. If you were born in 1960 or later and retire at 62, you will receive only 70 percent of full retirement benefits.
Advantages and Disadvantages
When you retire, you may find that you have more time to forge relationships and pursue personal interests such as travel. However, you also may have trouble adjusting to having so much free time and being around friends and family so often. You may miss co-workers.
Why People Retire
People retire for a range of reasons, some of them beyond their control, such as financial difficulties or a restructuring of their employer’s workforce. Others may retire because of health problems.
Wanting time with family and friends also spurs people toward retirement. The 62-year-old spouse of a 65-year-old person taking full retirement may take early retirement so they may spend time together.