Your ultimate guide to retirement: Savings, investments and tax tips to help you thrive
It can be of the biggest life decisions you face: when do you retire?
There are so many factors that this is nearly impossible to answer on an individual level. However, there are some broad answers to retirement’s most pressing questions. \
Each involves further research and understanding, and may have to be tweaked to fit your individual goals and situations. But by approaching retirement with the right information to meet your goals and a clear understanding of what it’s going to mean for your finances, you can set yourself up for success.
Here are some of the biggest questions you need to ask before retirement.
What age can you retire?
Theoretically, anyone can retire at any time provided they have the resources to live off of without working.
For the rest of us, full retirement age — or FRA — is when you are entitled to 100 percent of your Social Security benefits, according to AARP. For people born in 1960 or later, FRA is 67. If you are born in 1955 or 1956, it is 66 and 2 months or 66 and 4 months respectively.
The amount of retirement benefits you earned vary based on your work record, and claiming benefits before full retirement age will lower your monthly payments. Conversely, you can increase your retirement benefits by waiting past your FRA to retire.
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How much money do you need to save to retire?
The average person will need about 80% of their pre-retirement income to sustain the same lifestyle when they retire, according to some common saving and investing guidelines from The Motley Fool.
Of course, there are a lot of different elements and factors at play, including when you’ll retire, how much you plan to spend during your retirement for how long, and so on.
There are many retirement calculators out there, as well as plenty of different schools of thought. Some will tell you to sock away 10-15% of your income starting at age 25. Others say your retirement savings will need to equal the amount of your annual income by the time you’re 30.
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How much income will I need when I retire?
Again, this varies from person to person.
Using The Motley Fool’s 80% guideline outlined above, if you and your spouse make a combined income of $100,000, you’ll need about $80,000 annually after you retire, or a little under $7,000 a month.
If you both earn $1,000 through Social Security, and one of you makes another $1,000 from a pension or side business, then $3,000 of that $7,000 is already taken care of.
Also keep in mind you’ll be eliminating some expenses by not having to go to work or save for retirement anymore. However, whether you plan to travel or still have a mortgage will impact your goals, as well.
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What about Social Security benefits before or after Full Retirement Age?
Full retirement age (FRA) will depend on the year you were born. For this born in 1960 or later, FRA IS 67. Those born in 1959, it’s 66 and 10 months; 66 and 8 months for those born in 1958 and so on.
You are able to start claiming Social Security benefits at the age of 62, however if you claim before FRA you will be subject to a permanently reduced payout. On the flip side, delaying your benefits will allow you to collect more.
If you turn 62 in 2022 your full retirement age changes to 67. Keep in mind that if you turn 62 this year and elect to claim benefits, your monthly benefit will be reduced by 30% of your full retirement age benefit.
Now, let’s say you continue working before you turn 67 and also elect to collect benefits. The annual earning elimination is $19,560. In the year you reach full retirement age, that threshold is $51,960. The limitation disappears after you reach full retirement age.
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What is the best state to retire in?
You could poll 50 different people and get 50 different answers, but there is at least some consensus from financial experts on which state gives you the biggest bang for your retirement buck.
Georgia was named by Bankrate as the best state to retire in. The site noted Georgia’s relative affordability — light tax bracket and low cost of living — weather and wellness/crime as bright spots.
Florida, Tennessee, Missouri and Massachusetts rounded out the top five.
Maryland, Minnesota, Kansas, Montana and Alaska were the bottom five.
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Learn more about planning for retirement
This article originally appeared on USA TODAY: Retiring in 2022: What to know about investments, taxes and more
