One of the happiest moments in your life will be when you find out that you are financially ready to retire. Getting to that point in your life from the moment you started working and saving up for it may feel like a lifetime. You start to reminisce the time you did not know anything about retirement planning and what a 401(k) meant.
However, before you start drafting your retirement letter, you need to be aware of the signs that you really are ready for retirement. This is because times have changed from the moment you reported for your first day on the job. This is even more important if you have been on autopilot with your retirement plans the last few years.
One thing to consider is that according to JPMorganchase.com, most median-income families are coming up short on their budget. They are behind about $1,800 when accounting for volatility in expense and income. That is a lot of money and the question is – did you account for this and other market factors?
You do not have to worry because there are a few simple insights you need to consider to know if you are ready to retire. Here are a few of them to help you through your retirement journey.
You have paid off your debts means you are ready to retire
Debt is very much a part of your life.There are your student loans that helped you pay for the cost of attendance in college. Your mortgage loan that enabled you to purchase your dream home. A car loan that gave you the freedom to travel with your family. And even credit card debt that gave you the option to front-load payments on some big ticket items.
There are debt payments tips that you can use to address these payments. However, if you find that you have paid off most, if not all your debt accounts then this is a good sign that you are ready to retire. This is because your retirement fund will be used to support your retirement needs and not just go to debt payment.
It is challenging to go into retirement with mortgage payments and other financial obligations hanging over your head. Debt is already prohibitive in nature when it comes to financial choices when you are still employed. Moreso now if you choose to retire with unpaid accounts, it will restrict your options and could take away money meant for your basic retirement needs.
Retirement nest egg is more than what you need
Forbes.com shares that majority of older consumers are heavily reliant on their Social Security to address their expenses. If you look at your retirement nest egg and find that it has actually exceeded your target amount then that is a good sign. It is one of the factors that can definitively tell you that you are ready to retire.
One of the reasons for this is because you might have started early with your retirement savings plan. You might also be consciously putting any extra funds you get your hands on towards your nest egg. It is also possible that you have been maxing out your 401(k) contribution every month. These and a lot more could have contributed to reaching your goal early.
You are healthy
Your health is a big factor in deciding if you are ready to retire or not. Much like how you need workups when preparing for a medical procedure, the same goes for retirement. It is important that you put in an effort to keep your body healthy for retirement. This is not something that you can achieve overnight. It will take time and form a good physical fitness habit.
There are consumers who make money mistakes trying to be healthy. This is the last thing you need especially when you are already nearing retirement. You need to start early to help you develop these fitness habits. It can be as simple as walking in the park every morning or regulating your food intake. If you have time to go to the gym then by all means, do so. The usual challenge with these healthy habits is starting and maintaining them. If you keep at it long enough, they can develop these practices into a habit.
Your retirement budget is more than enough to cover expenses
If you have been able to stay away from committing sins against your retirement fund then there is a good chance that you are ready to hang up your corporate jersey, so to speak. Retirement is a new chapter in your life but it still requires you to have a good handle on your finances. As you retire, you will still have expenses but just slightly different from what you are used to.
The first thing you need to do is to crunch your numbers on what your expenses will be in retirement. The next thing is to look at what you have saved up and if your monthly allocation can cover your expenses. If the answer is yes then this is a good sign that you are ready to retire. Just be sure that this situation will not just last you a few months. It has to be a sustainable situation that will last you for years to come.
You have a retirement plan
This is one of the most common pitfalls retirees commit as they plan for the golden years in their life. It is exciting to think about all the things you want to do when you retire. There are even consumers who cannot wait to finally ditch their alarm clocks and just sleep in the whole day. For some, they would like to visit family and friends and travel around the world.
There are even some who plans on working well into their retirement years. BLS.gov explains that there are more and more people working as they get older. Some choose to do this because they just got used to working. Others need to continue working for financial reasons. The important thing when you are faced with retirement is to have a plan early on.
This retirement plan is not something you put together the last minute. This is because your funds need to match whatever you want to pursue in retirement. If you want to pursue a hobby in photography, that could bring in income to you every month. But know that you need to invest in it as well. The equipment is not coming in cheap. You need to plan for expenses like these beforehand.
The same is true for any plans you have for retirement. Travel, hobbies, social work or picking up consultancy jobs to keep your mind sharp. It has to be planned ahead of time so your finances can keep up. Otherwise, you run the risk of using your retirement fund to jumpstart your plans and your finances are thrown off course.
The feeling of knowing you are ready to retire can bring about mixed emotions. It is a new chapter in your life that you need to embrace and take on. It becomes easier when you have put in the financial work beforehand to make your retirement as enjoyable as it possibly can.