What Is Retirement Age? (And Steps To Plan It Effectively)

By Indeed Editorial Team

Published 31 March 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

While building your career, it is essential to plan for your retirement. It helps you estimate your retiring age and ensures you accommodate any medical emergencies, travel plans and other expenses. It is crucial to plan it early to ensure you lead a comfortable life. In this article, we discuss the average retiring age, steps to determine your retiring age, steps to planning early retirement and life after retiring.

What is the retirement age?

The retirement age is when you decide to permanently leave your job at a public or private sector company. You do not join another firm or start a new company, but leave the workforce to relax and lead a life free from professional responsibilities. The average retirement age in India is 60-years. Upon retiring, you rely on your passive income and savings to help you pay for daily expenses, travels and even medical emergencies.

People working as government officials receive a constant income and pension benefits even after retirement. The government ensures that retired government officials lead a comfortable retired life with no financial challenges. People working in the private sector or running their own business plan their retirement from an early age to ensure they lead a life without financial burdens.

How to decide the retirement age

When you retire, you stop a source of active income that you receive every month. This is why it is essential to ensure you have enough financial support to help you lead a comfortable retired life. Before you follow the below steps, hypothetically decide the age you retire and the number of years you may spend on a fixed income before retirement. Follow the next few steps to determine your retiring age:

1. Calculate your annual expenses

Understand the amount you spend every year. It will help you understand the amount you require for the future and plan your retirement. While calculating, keep your current living standards in mind and possible inflation rates. Determine where you want to spend your retirement years and calculate your expenses accordingly. For example, the retirement costs in a city may differ from spending those years in a small home on the hills.

Here is a list of parameters you may consider while calculating your annual expenses:

  • housing

  • utilities

  • food

  • travel

  • clothing

  • taxes

  • healthcare

  • emergencies

  • leisure

  • insurance premium

Related: What Is Annual Income? And How To Calculate Your Income

2. Determine your retirement income

Apart from what you save from your active income, calculate all other sources that will act as your source of income during retirement. These include returns from investment, insurance premiums, fixed deposits and bank commissions. If you are a government official, you may also add your pension amount to your income. If you plan to sell your home, downsize or liquidate other assets, add your potential income from these sources.

The estimate you derive from these calculations will help you compare and understand your expenses and the financial support available to fulfil them.

3. Calculate the budget for perpetuity

Once you understand your annual expenditures and income, determine the amount you may require depending on the expenses. Based on your calculations, understand if your income can help you live a comfortable life after retirement. You may also want to adjust your budgets and control expenses every month to meet your retirement goals. Once you calculate the final budget, estimate the retiring age.

You may also try to live on your retirement budget for a couple of months to determine if the lifestyle suits you. It helps you further understand your requirements and make informed decisions. You may also adjust your retiring age and retirement plans every couple of years basis your standards of living.

4. Consider your circumstances

Your retirement plans may change due to unforeseen circumstances, such as healthcare expenses, layoffs at a job or even education expenses for your child. You may enjoy the job you currently do and postpone your retirement by a couple of years to earn more and live a more comfortable life. While creating a retirement plan, prepare yourself to revisit it and make changes whenever necessary.

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5. Seek help

Several professionals such as a financial advisor, wealth manager or retirement planning expert help you make informed choices and plan your retiring age. They consider your finances, retirement funds, retirement benefits and your financial goals. They use the information to help you make investments, calculate the returns and help you plan a retirement that suits your standards of living.

When can you retire early?

You retire when you develop a retirement plan and have enough savings to support it. It provides you with the confidence to lead a sustainable life with a fixed income. When you wish to advance your retiring age, here are a few things to consider determining if you can retire early:

  • You paid all your debts. When you pay off all your loans, credit card balances and interest payments on debts, you no longer have to pay a fixed part of your income monthly or annually. You create a fund that suffices all your requirements for retirement.

  • You saved enough money. Consider retirement once you save enough to meet your annual expenses. While these expenses may vary every year, your savings may suffice to live until perpetuity.

  • You are ready for unforeseen expenditures. Your retirement fund has an abundance of savings kept for emergencies, and you can continue to sustain your lifestyle despite such situations.

  • You have healthcare insurance. Your financial planning accommodates any medical emergencies with appropriate insurance coverage. Instead of health insurance, you may have a separate fund with savings for such emergencies.

  • You are familiar with living on a budget. Retirees live on a fixed income and monitor their expenditures. You may practice living on a budget for several months and understand if you may retire with your current financial status and expenses.

Related: What Are Benefits Of Employment? Definition And Types

Life after retirement

Once you retire, you have a lot of time to explore new opportunities and experiences. Retirement is much like restarting your life. Here are some things you may do once you retire:

Discover a new hobby

Before retirement, you are running errands or completing work at the office. After retirement, you may use your free time to develop a new hobby. Hobbies keep you occupied and also help keep your brain active. You may indulge in activities such as painting, gardening, pottery, reading, developing a new skill or learning something on the internet. It is essential to make your day productive, as it makes you feel satisfied.

Exercise regularly

After retirement, it is essential to maintain an exercise routine. It ensures you stay fit and healthy. As you grow older, you may choose to reduce the intensity of the workout. Staying fit in your retirement years allows you to enjoy life. You gain the freedom to travel, explore new places and perform your day-to-day activities with no dependencies. It is imperative to maintain a healthy diet. Focus on your physical and mental health. You may choose to take some time off your day to meditate or practice mindfulness.

Generate a source of income

Passive income is any income that generates a cash flow after a one-time investment. There are several ways to generate a passive income, like investing in equity, investing in real estate, investing in companies or earning through a royalty on books, podcasts, music or videos. Content creation in any form may help you generate an alternate source of income. While you prepare budgets before retiring, a source of passive or additional income may help you gain better financial stability than you planned originally.

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Spend time with your loved ones

When you retire, try to spend time with your loved ones. You may visit them or plan activities such as potluck lunches, cooking sessions, games or movie night. Such activities help you strengthen your relationships and provide something that gets you excited. It protects you from feeling isolated or bored.

Travel around

Plan your finances in a way that allows you to travel and experience new things. You may choose to travel alone, with your family or friends. Travelling can be refreshing and help you find a new hobby to pursue. It is essential to plan your budgets to accommodate regular travel plans.

Maintain your finances

Even if you plan your retirement, it is crucial to check your financial status. It helps you plan your expenses and downsize if necessary. You may also wish to explore new avenues if you have an abundance of budget. Similarly, you may choose to invest and create a passive source of income that helps you maintain or upgrade your current living standards.

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