Whether you are approaching ‘retirement age’ or just sick of your job, you may have started thinking about retirement. But long gone are the days of working at a company until retirement and then living comfortably off of a generous pension. Today’s economy means that some careful planning and thought needs to be put into your readiness for retirement. Here are five signs that you may be ready.
You Have Enough Money and Income
This may be a no-brainer, but too often, people retire without a clear picture of how they are going to pay for things they need and want for the rest of their lives. Fortunately, making this determination is fairly simple and only requires basic spreadsheet skills.
Start with a budget covering the last few years. How much did you spend on each group of necessities such as food, clothing, mortgage, etc.? Don’t forget to include categories such as dining out and vacations. You want to be able to enjoy your retirement. Put these expenses into a spreadsheet covering each year beginning now and stretching to a healthy lifespan. Also be sure and include things like health insurance and unexpected expenses.
Next, build rows that hold current assets and future income. Add in all your current savings, CDs, and other cash holdings. Include rows for any pension or retirement plan, 401Ks, Social Security and any other sources of income. Plug in one time income such as sale of your home or other cash inflows you might expect.
Now simply add a row that creates a calculation that begins with your current assets and adds income each year while deducting expenses. Does the bottom line stay positive throughout your life? If yes, you have enough to retire.
Your Debts are Paid and Major Expenses are Covered
This goes hand in hand with the budget, but it will be much easier if the big costs are taken care of. Do you have a paid off home? If not, look at the budget and see if an early pay-off might be possible. Or maybe you have a paid off vacation home that become your primary residence after you sale the house you are in now. That mortgage payment has been the major expense your whole life. Making a budget without that hanging over you is much easier.
The other big expense you may face in retirement is health insurance. Will you recover from a company that will pay or help subsidize this? Are you eligible for Medicare yet? Have you looked into independent insurance through the Affordable Care Act? As you grow older, health insurance will become more important than ever. You need to make sure that factor is taken care of before you quit your job.
You are Emotionally Ready to Retire, Relax and Let Go
Just because you hate your job and have the means to retire doesn’t mean you are ready for retirement. After decades of the daily grind, many people find that the different pace of retirement just doesn’t suit them. You have a daily routine that is so ingrained into your life that sudden changes can be difficult. You can’t really gauge this by your weekends when most people are busy with errands they can’t do during the week. Vacations aren’t a good benchmark either since they are mostly spent blowing off steam and stress from work.
This isn’t an insurmountable problem, but like your budget requires a little planning. The question that needs to be answered is simply, how will you spend your time? If your response is travel, that’s great, but make sure that is built into the budget you made above. Just how much travel can you afford? Do you have hobbies that you enjoy and don’t have enough time for? How much of your newly found free time can you fill with these hobbies? If not enough, can you find other things to occupy your time and your mind? Many people find fulfillment in volunteer work. If all else fails, you can find part-time work in a field you enjoy, so it doesn’t feel like going back to work.
Your Children are Settled, and Your Friends are Retired
Let’s face it, retirement will be an entirely new lifestyle for you. It will be difficult enough to adjust to without support from friends and family. Are your kids settled down and financially stable? Unless you are budgeting for it, you can’t be dipping into your retirement funds to help pay for college or a new car. If you are going to retire comfortably, your children need to be able to stand on their own. On the other hand, if they are settled and successful and living somewhere else, maybe it’s time to look at moving closer.
What about your friends. If all or most of them are retired, then you have a pool of experts to help you get over the initial hurdles you may need to jump. They have been there and can be an excellent source of advice based on their recent experiences. Also, if they are retired, then you have a readily available pool of travel companions and people to fill your days with trying new experiences and activities.
It’s The Right Time
You’ve worked hard all of your life. It’s time to get a reward for all that. The time for making money is past, and now you are ready to spend some of it. Your expenses are covered; you know how to spend your free time, and it’s just time. Go for it.
Or maybe, you need to retire for health reasons. Your job may be causing undue stress or contributing in some way to declining health. Don’t go down with the ship. Enjoy your golden years — you’ve earned it.
If you fit most or all of these signs that you are ready to retire, put the finishing touches on your plan and go for it!
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