Retire

Definition

Retire: To withdraw, leave, or depart from a particular activity or situation. Retirement often refers to the end of one’s professional career, typically due to age or personal choice. Retirement is also commonly associated with plans and arrangements made to secure financial stability post-career.

Examples

End of Career: An individual retires from their professional job at the age of 65, ceasing their full-time work responsibilities.
Military Service: A soldier retires from military service after completing the required number of years or reaching a specific rank.
Athletic Career: A professional athlete retires from competitive sports either due to advancing age, injuries, or choice.
Corporate Exit: An executive retires from a company’s board of directors, transitioning from active involvement to a more advisory role or complete disengagement.
Early Retirement: An individual choosing to retire early at 50 due to achieving financial independence.

Frequently Asked Questions (FAQs)

What are common ages for retirement?

Retirement ages vary, commonly ranging from 60 to 70. Many countries have specific retirement ages entitling individuals to social security benefits.

What financial planning is necessary for retirement?

Key financial planning steps include creating a retirement savings plan, investing in retirement accounts like 401(k)s or IRAs, calculating post-retirement expenses, and considering health care costs.

Can someone retire and still work part-time?

Yes, individuals can choose to retire from their primary careers but continue working part-time or on a contract/consultant basis.

What is early retirement?

Early retirement involves retiring before the usual retirement age, often due to personal choice or achieving sufficient financial savings to support one’s lifestyle.

Are there benefits to delaying retirement?

Delaying retirement can provide financial benefits such as increased pension or social security benefits, extended health care benefits, and continuing to contribute to retirement savings.

Pension: A regular payment made during retirement from an investment fund to which an individual or employer has contributed during their working life.
401(k) Plan: A retirement savings plan sponsored by an employer allowing employees to save and invest a portion of their paycheck before taxes are taken out.
IRA (Individual Retirement Account): A retirement account that offers tax advantages, with different types such as Traditional IRA and Roth IRA.
Social Security: A government system providing monetary assistance to people with an inadequate or no income, especially in retirement.
Annuity: A long-term investment issued by an insurance company designed to help protect an individual from the risk of outliving their income.

Online References

Suggested Books

“How to Retire Happy, Wild, and Free: Retirement Wisdom That You Won’t Get from Your Financial Advisor” by Ernie J. Zelinski
“The 5 Years Before You Retire: Retirement Planning When You Need It the Most” by Emily Guy Birken
“Retirement Planning Guidebook: Navigating the Important Decisions for Retirement Success” by Wade D. Pfau

Fundamentals of Retirement: Financial Planning Basics Quiz

### At what age is someone typically eligible for full Social Security retirement benefits in the United States? - [ ] 60 - [ ] 62 - [x] 66-67 depending on birth year - [ ] 70 > **Explanation:** In the United States, the full retirement age for Social Security benefits depends on the year of birth, generally ranging from 66 to 67 years. ### Can you contribute to a 401(k) plan after retiring? - [ ] Yes, indefinitely. - [ ] No, contributions must stop immediately after retirement. - [x] No, contributions are only allowed while employed. - [ ] Only if the plan provider allows > **Explanation:** Contributions to a 401(k) plan can only be made while the individual is employed and drawing a salary from the employer offering the plan. ### What is a key benefit of delaying retirement? - [ ] More vacation time - [ ] Earlier social security access - [ ] Higher medical expenses - [x] Increased Social Security benefits > **Explanation:** Delaying retirement may lead to increased Social Security benefits, as benefits grow each year you delay receiving them beyond full retirement age up to age 70. ### What type of IRA allows for tax-free withdrawals in retirement? - [x] Roth IRA - [ ] Traditional IRA - [ ] SEP IRA - [ ] SIMPLE IRA > **Explanation:** A Roth IRA allows for tax-free withdrawals in retirement, provided certain conditions are met, such as the account being open for at least five years. ### What is considered an early retirement age by the IRS? - [ ] Before 60 - [ ] Before 55 - [x] Before 59 1/2 - [ ] Before 62 > **Explanation:** According to the IRS, withdrawing from retirement accounts before the age of 59 1/2 generally constitutes early retirement and may attract penalties. ### Which type of investment is typically used to provide a steady income during retirement? - [ ] Stocks - [x] Annuities - [ ] Mutual Funds - [ ] Real Estate > **Explanation:** Annuities are often used to provide a steady income stream during retirement, converting a lump sum into a regular payment over time. ### What is the primary purpose of a pension plan? - [ ] Short-term savings - [x] Long-term retirement income - [ ] Tax reduction - [ ] Health care coverage > **Explanation:** The primary purpose of a pension plan is to provide long-term retirement income, typically funded by contributions from the employer and/or employee. ### Why is health care a significant consideration in retirement planning? - [x] Increased health care needs and costs - [ ] Decreased health care needs - [ ] Guaranteed coverage - [ ] Lower insurance costs > **Explanation:** Health care needs and costs tend to increase with age, making it a significant consideration when planning for retirement. ### What does the term "fixed income" commonly refer to in the context of retirement? - [ ] Flexible spending accounts - [ ] A continuously growing income source - [ ] Government grants - [x] Regular, predictable income payments > **Explanation:** In retirement, "fixed income" often refers to regular, predictable income payments from sources like pensions, Social Security, and annuities. ### What factor can significantly impact the amount needed for retirement savings? - [ ] Age of first employment - [ ] Number of children - [x] Expected length of retirement - [ ] Marital status > **Explanation:** The expected length of retirement greatly impacts the amount needed for retirement savings, as a longer retirement period requires more savings to ensure financial stability.

Thank you for embarking on this journey through our comprehensive retirement lexicon and tackling our challenging sample exam quiz questions. Keep striving for excellence in your financial planning knowledge!