How To Tell Whether It's Time To Retire

5 Things To Consider When Making the Decision To Retire

Woman working in wood shop

Trinette Reed / Stocksy United

Deciding when to retire is one of the most difficult career decisions a worker can make. Employees are often earning their maximum income at the point of retirement, so the financial implications of retiring too early can be profound.

Careful planning about the transition from full-time employment to retirement can enhance your chances of making a smooth adjustment. There are many elements to consider before making a final decision.

Before you decide to retire, consider your:

  • Job satisfaction
  • Physical/mental ability to work
  • Financial stability
  • Health care coverage
  • Life satisfaction

Key Takeaways

  • Retiring too early can have serious financial consequences, especially if you are not yet eligible for Medicare or Social Security.
  • Plan to save at least eight times your salary by age 60, and at least 10 times your salary by age 67.
  • Budget for health care costs; the average couple who is now 65 will need $295,000 to cover medical costs in retirement.
  • Many retirees start with a "soft" retirement, in which they scale back from full-time work but don't leave the workforce entirely.

Job Satisfaction

Don't confuse an unsatisfying job situation with an imperative to retire. Employees who are working in a job that is not a good match for their skills, values, and interests are more likely to rush a retirement.

Retiring too early can have serious financial consequences, especially if you are not yet eligible for Medicare or Social Security. If you are younger than you expected to be at retirement age, ask yourself:

  • Are you ready to stop working entirely, or ready to stop your current job?
  • Would you still retire if you were in a better work environment?
  • Would you be happier with a career change rather than retirement?

If you have any doubts, consider working with a career counselor or exploring other job opportunities in your field. You may find that a career change is a better choice for you than retiring at this time.

You may also discover that your lack of satisfaction with working has nothing to do with the job itself and more to do with your readiness to stop working entirely. If that's the case, it may be time to start considering retirement.

Physical and Mental Ability To Work

Some physically demanding jobs, such as working in construction, are difficult to continue past a certain age. Even if you prefer to keep working, you may find yourself running into physical difficulties performing your work.

If you experience cognitive difficulties, or if such health problems run in your family, you may also find yourself considering retirement earlier than you might otherwise want to.

If you are concerned about your physical or mental ability to perform your job, talk to your doctor about your concerns. They may be able to give you a projected timeline for how much longer you can expect to keep working.

If you anticipate having to retire early due to your health or physical ability, start planning early for how you will handle your finances and health care during retirement.

Financial Stability

Once you're retired, you'll likely want to stay retired. That means you'll need to have enough money saved up to meet your needs. Track your expenses to get a realistic handle on how much income you'll need to sustain your preferred lifestyle. Some good benchmarks to consider include:

  • Save at least eight times your salary by age 60.
  • Save at least 10 times your salary by age 67.

If your savings are in that ballpark, you could be in good financial shape to retire.


If you are married, you and your spouse will need to decide on financial details such as:

  • Whether pension payments will be a lump sum, single-life, or joint-life
  • Whether your spouse will retire at the same time as you
  • When you will both start taking Social Security
  • When you will start taking distributions from a 401(k), IRA, pension, or other retirement plan

In addition to tracking your current expenses, you'll need to factor in changes you could reasonably anticipate after retirement. For example, you would no longer be spending on work clothes or commuting costs, but you might spend more on travel, entertainment, dining out, hobbies, and health care.

Consult a financial planner for insight into whether you have the money you'll need to retire. The Social Security Administration can also help you estimate your retirement benefits. Reach out to representatives from your pension or 401(k) plans to identify your income potential from those sources.


The actual amount you'll receive in Social Security benefits may be different from any estimates, depending on when you retire. The laws governing Social Security benefits may change, because the trust fund reserves are projected to be depleted by 2034.

Health Care Coverage

No matter how healthy you are when you stop working, at some point in your retirement, your health care needs will increase. Planning for your health care costs is a key aspect of planning for retirement.

For many retirees, health care costs account for the greatest portion of their budget. The average couple who is now 65 will need $295,000 to cover medical costs in retirement—and that doesn't include long-term care.


Of today's 65-year-olds, one out of five may need long-term care or living assistance for more than five years. Consider whether to invest in long-term care insurance, which can help with these costs.

If you aren't yet old enough for Medicare, consider your options for health insurance coverage and know the costs. Meet with a member of the human resources staff of your current employer so you will be fully aware of any post-retirement health benefits offered.

Even once you are eligible for Medicare, it might not cover all of your medical expenses after you retire. About 14% of the average retiree's annual expenses will be related to health care, including Medicare premiums. Be sure you have a plan for covering the costs of:

  • Health insurance premiums
  • Regular preventive care
  • Prescription drugs
  • Surgery and other procedures
  • Long-term care or nursing help


Medicare does not provide coverage for long-term care associated with the daily activities of living, even if your health care expenses are covered.

Life Satisfaction

In addition to the logistical aspects of retirement, you also need to consider the emotional and personal fallout. While many retirees enjoy the freedom to travel, visit family, and explore hobbies after they leave the workforce, others experience a lack of direction, boredom, and loss of life satisfaction.

If you want to make sure you are prepared for retirement, consider doing a trial run while taking some time off from work, such as:

  • Exploring some of your planned pursuits or hobbies
  • Doing some consulting as a side gig
  • Volunteering with an organization you care about

Many retirees also start with a "soft" retirement, in which they scale back from full-time work but don't leave the workforce entirely. If you need to generate some income or would prefer to continue with some employment to keep busy, talk to your boss about reducing your hours at work.

Scaling back from work a handful of hours at a time provides a way to ease into retirement without any sudden changes to your lifestyle or budget. Your employer might also consider retaining you in another role, such as a consultant.

Frequently Asked Questions (FAQs)

When is the best time to retire?

There is no single best time to retire. The decision depends on your financial situation, health care needs, and mental and physical capacities. Your level of enjoyment at your job also plays a role. If you generally enjoy your job and are able to work, the longer you do so, the less financial strain you will likely experience during retirement.

How do I calculate my Social Security benefits when I retire?

The Social Security Administration offers several ways to estimate your benefits. You can create an online account to see exactly what benefits you've earned and what they would be at different retirement ages, or to estimate your benefits based on your current salary and planned retirement date.

What happens to my 401(k) when I retire?

When you retire, you can generally leave your 401(k) with your employer and begin taking distributions from the account. Another option is to roll your 401(k) into an IRA, which preserves the tax benefits and may offer you more investment flexibility. That is an especially good option if you already have an IRA and want to consolidate your accounts.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.
  1. Social Security Administration. "Trustees Report Summary."

  2. Department of Health and Human Services. "How Much Care Will You Need?"

  3. Kaiser Family Foundation. "The Financial Burden of Health Care Spending: Larger for Medicare Households than for Non-Medicare Households."

  4. "Is My Test, Item, or Service Covered? Long-Term Care."

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