If retirement is on your radar, you might be wondering if you should retire next year. Your decision when to retire can be life changing and will influence your quality of life for the rest of your life. As such, let’s look at the factors that might influence exactly when you retire.
Is 2025 A Good Year To Retire?
There’s nothing generally inherent in the year 2025 that says it’s a good or bad time to retire. It really depends on whether you’re ready financially and emotionally.
The lists below outline the pros and cons of retirement readiness. You’ll be ready to retire if you can check many more pros than cons.
What Are the Pros Of Retiring In 2025?
You might be ready to retire in 2025 if you’ve completed the following tasks:
- You’ve estimated your stream of lifetime retirement income from all sources, and it’s enough to cover the regular living expenses you expect to be paying for the rest of your life. Sources of lifetime retirement income include Social Security, any pensions you might have, and retirement paychecks generated from your savings. For most people, this is the most critical indicator of whether you’re ready to retire.
- You know how your living expenses might increase in retirement and have factored that into your planning. For instance, your health insurance premiums may be higher, particularly before Medicare. You’ll want to understand how much you’ll pay for medical insurance and related out-of-pocket medical expenses such as deductibles and copayment. You’ll want to estimate how these amounts will change before and after you’re eligible for Medicare at age 65.
- On the other hand, some expenses might decrease, and hopefully you’ve factored that into your budget, too. Lower expenses might include the cost of raising children or housing costs, if you expect to pay off your mortgage.
- You have a good idea of the reasons you want to retire. Ideally, you’ll have some positive reasons that pull you into retirement, such as travel, hobbies, and other activities that are only possible when you retire. On the other hand, you might have negative reasons that push you into retirement, such as burnout or boredom on the job, or poor health. Hopefully you’ll have more positive than negative reasons.
- You have a good idea how you’ll spend your days in retirement, beyond just the vacations and travel that you might expect to enjoy. Be sure to include regular social contact with people you care about—it’s been shown to be good for your health and help combat loneliness.
If you’ve completed or thought through most or all these items, you might be ready to retire in 2025.
What Are the Cons Of Retiring In 2025?
If you haven’t completed all the planning steps listed above, you’re taking a risky gamble that retirement will improve your life. Each step you haven’t taken becomes a con for retiring in 2025. Until you complete those planning steps, you might want to wait to retire.
Are There Special Considerations For Retiring In 2025?
It’s only natural that you might be wondering how performance of financial markets in 2025 might influence your decision to retire.
For example, you might want to take advantage of the recent run-up in the stock market. In that case, you’ll want to lock in some of your gains and protect yourself if the market declines in the near future. To this end, Christine Benz, Director of Personal Finance at Morningstar and author of the recent hit book How to Retire, offers these suggestions: “Pre-retirees may want to consider rebalancing their portfolios and building a runway of seven to 10 years of withdrawals from protected assets such as cash, high-quality short- and intermediate-term bonds, TIPS and Series I Savings Bonds.”
Some pre-retirees might be worried that inflation will increase as a result of President-elect Trump’s policies regarding tariffs. In this case, Benz offers these suggestions: “Optimize Social Security’s inflation-protected retirement income, consider investing in TIPS or Series I Savings Bonds, and carefully invest in stocks that have historically kept pace with inflation.”
Benz also suggests that retirees keep a good sense of humility when planning for specific economic scenarios, since professional and amateur investors alike have often been wrong with their projections for the near future.
What Month Is Best To Retire?
There’s nothing generally inherently good about retiring in any particular month. Instead, you’ll want to consider factors that are specific to your situation. For example:
- There may be work-related factors that dictate the best month for you to retire, such as when you might receive a bonus payment, reach an eligibility threshold for retirement or retiree health benefits, or complete an important project. You’ll want to learn when your employer makes retirement contributions to your 401(k) plan and how unpaid vacation is treated when you retire.
- Certain benefits might increase for every month you wait to retire, such as Social Security or pension benefits. Do your research to find out how you might benefit by waiting.
- It’s likely your taxable income will decrease after you retire, which could reduce your tax bracket and might help you determine the best time to retire. Consider asking your tax accountant for an analysis.
- You might have personal reasons that indicate the best month to retire, such as the birth of a grandchild or an important wedding or family reunion to attend.
Here’s one final critical task: If you’re married, find out what your spouse thinks about your retirement and all the tasks listed here. Prevent the comment lament, “Now I have half the income and twice the spouse.”
Retirement is one of the most important decisions you’ll make for the rest of your life. Do your homework—don’t make this decision lightly.
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