Retiring this year can be both exciting and scary at the same time and here is why.
Retirement could be something you have been looking forward to for quite some time now. You have slowly prepared for it in the years leading to today. Putting aside money towards your retirement accounts and trying to make sure you have what you need in your golden years. But even then, you could still be having second thoughts.
If you are having second thoughts about retirement even if you prepared for it, imagine how it would be if you did not take planning too seriously. You could be nearing your retirement age but still not have the funds you need for a comfortable living. It is also possible that if you did not put much thought into it, you have no idea as well what you will do in retirement.
Retiring this year can either be the greatest decision you will make this year or the worst. This all depends on how well you planned for it leading up to this year. Remember that retirement is not a simple decision you can make on a whim. It requires careful planning and dedication to your retirement goals.
If this is the year you want to retire then it might help to go over some areas in your life first to help you understand if you are ready. It can help you determine if this is the year you can finally hang your office coat and start a new chapter in your life. Below are some items that could look into if you are planning to retire this year.
Is it time to retire?
According to Gallup, the average retirement age for Americans is 66. This is a great benchmark if you are looking at your options but it is by no means a definite age. It does not mean that when you reach the age of 66, you should retire. Remember that this is just the average age by which most people retire. Some do it earlier while others take a lot longer time than that.
As much as time is a factor in retirement, your preparation also plays a crucial role if you are retiring this year or not. As mentioned earlier, preparation for retirement is a long process usually spanning years or even decades. As you get to your target retirement age, you ramp up financial preparations for your golden years.
This usually means setting aside significant amounts of money over to your retirement accounts. In doing so, you get to take advantage of compound interest making your money work for you. The bigger the amount you set aside and the longer time you allow them to compound, the more impact it will have on your retirement goal. So more than just the age, take a look at how well you prepared for retirement as well.
How close are you to your retirement goals?
Retiring this year can be a fun thought but are you anywhere near your goals? The moment you begin to plan for retirement, you have to remember that you need to set goals as well. More than just the financial aspect of retirement, there are other areas of that stage in your life worth planning for. And you need to check how close you are to these goals before retiring
Normally, on top of your list should always be your retirement nest egg. How much do you have saved up and is that enough to give you a comfortable life? Will you be able to live off that amount and give yourself the best years of life? If yes, then that is great. You can move on to other goals you have planned out like activities.
What are you going to do in retirement? Are you moving someplace else much more affordable? Do you plan to live closer to family and friends? Or do you prefer to stay in an institution that can care for you? Are you spending most of your time volunteering or reading a book by the beach? Do you have plans of setting up a consultancy business to keep you busy? Before you retire, you need to take a closer look at these plans and see how close you are to make them happen.
Do you have a lot of debt?
Retiring this year could be the best decision you will ever make this year especially if you were able to save more than enough for your financial needs. But before you do that, you need to check your debt payments as well. This is a crucial component of your total financial setup in retirement that overlooking this part can spell disaster on your end.
You might have reached your retirement savings goal or even surpassed but if you have a lot of debt, then that might mean too little when the statements start to come in. Check the types of debt payments you have, if any, heading towards retirement. It is best to pay off as much as you can especially the high-interest accounts before retiring.
The reason is that the payments will only eat up your retirement income. If at all possible, you need to be done paying your mortgage loan as well before retirement. This is because your mortgage is usually the biggest payment you have every month. You can choose to sell the house and settle for a smaller one in retirement as well. This way, you’re free from mortgage payments and get a smaller house that is easier to manage.
Is it tough retiring this year?
Like many people, you could be asking the same question about your retirement, especially coming off the pandemic in the past years. The health crisis impacted so much of our society over and above the medical industry. It rippled out to jobs, businesses, and even relationships. And in all these, your retirement income could also be affected.
Remember that if you invested your money in stocks and other assets, the value of your nest egg could have made a significant drop in the past years due to the pandemic. As a result, you could be way off your target in terms of investment earnings and potential income. That being said, you need to be very clear if what you have saved up until now can provide you with what you need in retirement.
If not, you should not worry. There are a few things you can do such as pushing your retirement date back a few years. Or until such time that you get your investments back on track. If possible, you could also take on a lower workload so you can semi-retire. Setting up an income-positive hobby as a side hustle can also be an option. This allows you to enjoy what you do while earning extra money all while getting the security of a day job check.
Retiring this year can be an exciting life decision to make but you need to be sure about it. There are some areas in your retirement planning you need to check up on before making that big leap.