Many of us dream of retirement and the freedom it will bring. The reality is that retirement can be expensive, but with good planning you can help make sure you have the retirement you dream of.

A good starting point is to think about how you’ll support yourself throughout your retirement, along with how you plan to spend your retirement days, how you'll stay busy, and how you'll maintain social connections. All of these are important factors to consider before retirement.

Retirement can be expensive

Here are a few things to think about before you retire:

Finances

If you retire early, you’ll have fewer years to collect a paycheck and save for your retirement. You’ll also have more years to support yourself without a paycheck, and you could add another decade to your retirement. In fact, some people may spend more years in retirement than they spent working.

Healthcare

The cost of health care is another major factor that makes retirement expensive. Even if you are at least 65 and eligible for Medicare, you will likely want to purchase a supplemental Medigap plan or choose a Medicare Advantage plan to help cover health care expenses.

Benefits of delaying your retirement

There are a number of reasons to delay your retirement that may work in your favor. Let’s take a look at a few of these benefits:

Increase the amount of your CalSTRS or CalPERS monthly pension benefit

There are special conditions that can increase your benefit:

• You may be able to purchase additional service credit to increase your CalSTRS/CalPERS benefit.
• Unused sick leave can help increase your CalSTRS benefit.
• The longevity bonus can increase your CalSTRS benefit, but only if you have 30 years of credit by Dec. 31, 2010.

Allow you more time to save in your 403(b) or 457 plan

Let's take a hypothetical example of someone who originally planned to retire at age 58, but decided to wait until age 63. She contributes $300 a month to her 403(b) plan, which earns an average annual return of 5%.* In five years, she could accumulate more than $18,000 extra in retirement savings.

Potentially increase your Social Security benefit

Many California educators are not eligible for Social Security, and those who are may be subject to reduced benefits because of the Windfall Elimination Provision or the Government Pension Offset. However, if you are eligible for Social Security benefits, waiting until your full retirement age (65 to 67, depending on your year of birth) or later (up to age 70) may increase your monthly benefit. Read more about educators and Social Security here.

Whether to retire earlier or later is a personal choice, but you will want to do your homework to make sure you are prepared. You may also want to meet with a financial advisor to discuss your retirement income options before making a decision.

*Sources

Rate of return is for illustration only. It does not represent the return of any specific investment. Your returns will vary depending on the performance of the products you choose for your plan.