Mar 26, 2025
You love your job, and you’re still working at 65 and don’t really see yourself stopping anytime soon. But one day, you get a letter from a previous employer that you’re eligible to receive a pension.
What’s the right move: retire and live off the amount, or keep working for several more years? At 65, you’re slightly over the average retirement age for Americans, which is 62.
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Arriving at the right answer for your specific situation means looking at several factors, including the amount you’ll receive, your post-retirement budget and even your personal goals.
Scrutinize your finances
When considering whether to retire, looking at whether you can afford to do so should be your first step. If you’re not in a rush to retire, take the time to track and evaluate your current expenses and any others you may have once you retire. For example, if you want to budget in for trips several times a year, estimate how much you’ll need. Also consider what health insurance you might require at home or while travelling.
Then, you’ll want to see how much your pension payout will be and whether that, along with any savings you have for retirement, will be enough for your needs. You should be able to see how much you’ll receive, and whether that amount will change as time goes on.
For example, you may qualify for what's called a straight-life annuity which offers you a flat monthly payment until you pass away. If you're married, you may be able to receive a different monthly payment, and a lower amount after you pass away that is intended for your surviving spouse.
Some pension plans give you a lump sum straight away, and you can decide how you want to allocate your funds. Or, there is a minimum required distribution age, so even if you wanted to delay taking payments, you won’t be able to.
In either of these cases, you can put your funds into an IRA or other type of retirement account and work out on your own how much you can withdraw each month in order for it to last.
Aside from your current budget, you’ll also want to factor in other increases like inflation and any additional cost-of-living adjustments.
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Your healthcare needs may change, and your budget needs to be able to anticipate these costs. Long term care is a real possibility once you’re older, so including these costs will help to ensure you have enough money. Same goes for any other anticipated expenses, like replacing the roof in 10 years or purchasing a new car.
Working with a reputable financial advisor could help you determine how much you’ll need during retirement and whether it makes sense to keep working or retire now on your pension.
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What to consider besides your financial needs
Retirement is a huge life transition and being able to thrive in your golden years is more than simply having enough money. Other considerations like your health, social life and maintaining hobbies are all important. Being engaged within your community can help combat loneliness and offer a chance to cultivate good mental and emotional health.
Once you give up your career for good, you may experience a dramatic shift in your identity. Thinking about how you’ll identify yourself may sound minor. However, understanding what defines you outside of work can give you a smoother transition once you’re officially retired. If you heavily identify with work, it may make sense to delay retirement until you figure out who you are outside of it. Or you may want to consider transitioning to part-time work.
Questions to ask yourself can include things like: How will you find purpose and meaning? Will you volunteer several times a week at your favorite nonprofit? Travel long-term? Join a local fitness group?
Maybe you want to take your hard-earned knowledge and skills and mentor new graduates or those just entering your field. Or consider working part-time at your local coffee shop to build a sense of community.
Having a plan now — whether you decide to retire next month or year — will help to ensure your transition to the next phase of your life is as seamless as possible.
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Sarah Li-Cain, AFC is a finance and small business writer with over a decade of experience.
