Retiring can be both exciting and stressful, especially if you are not financially ready to retire yet. Retiring means that you’re going to relax and not worry about setting up your alarm anymore. Also, retiring means that you don’t have to put long hours to get the funds that you need. But all this is possible if you’re financially ready.
Now, if you are unsure whether or not you are ready to retire, then the information below will help you know if you are or not. In this way, you can start preparing for your retirement as early as now.
1. High Amount Of Debt
If you have a high amount of debt, you will definitely have a hard time saving. This can eventually strain your retirement savings. The best thing that you can do is to eliminate or at least reduce your car loans and credit card payments. You can also downsize or pay off your mortgage as this will help you.
Remember that paying your debt right before you retire may also mean you need to work for more years. It may not be your plan, but it will surely be worth it because you no longer have to worry about monthly payments when you already retired.
2. Paying Current Bills Is A Struggle
If you are struggling to pay off your current bills, then this means that you will have a hard time retiring. Based on studies, for a retiree to live a comfortable retirement life, he would need almost 75% of his income. Usually, a retiree’s income will come from IRAs, 401(k)s, pensions, Social Security, and other types of savings.
There are retirement savings that are still taxable, which means that it will reduce your retirement income. So if you want to be ready to live a comfortable life during your retirement, then saving for it will surely help.
3. No Plans For Huge Expenses
When planning for your retirement, besides money, you also need to prepare for huge expenses that may also come a long the way. During your retirement you might need to purchase a new car and a vacation home. You may also need to repave your driveway or replace your roof. Being ready for these things will help you avoid spending your savings for yourself.
The best thing that you can do is to always include it in your retirement savings. List down the expenses you might incur while you are enjoying your retirement. In this way, when the time comes that you need to replace your roof, you don’t have to worry about anything because you already allotted a budget for it.
4. Monthly Financial Plan Is Non-Existent
Remember that once you retire, your paychecks will stop, while your bills will continue to be sent to your home. The best thing that you can do is to plan your cash flow monthly. You also need to start checking the benefits that you’ll receive from Social Security, and how much you can withdraw from your retirement accounts. Now, if you have both Roth IRA and the traditional IRA, think about the RMDs and the taxes. The reason behind this is that these things will affect your withdrawals.
Having a financial plan monthly will help you have a grasp of all your expenses. Check your spending history for at least three years to help you know what changes will happen once you retire. All these will help you know how much money you’ll need monthly and expect how much your expenses will be.
5. Unfamiliar With Social Security Benefit
Yes, you shouldn’t rely on your Social Security entirely, but you still need to be familiar about the benefits that you can get from your Social Security. You can use the calculator that the Social Security Administration offers, so you know how much benefit you’re going to get. Usually, if you are at the age of 61 when you retire, your checks will be smaller by 30% compared when you retire on the right age.
If you want to get higher benefits, it would be best to keep working until the retirement age. You will definitely get larger monthly payments. You can also add more to the benefits that Social Security will offer if you also contribute.
6. You’re Still Into Your Job
There’s nothing wrong with loving your job since you can still work even after your retirement age. In fact, there are people who are beyond their retirement age that still prefer working. The reason may be because they still need to earn more or support a family. If you are happy and you love what you’re doing, there is no need to rush in retiring. But this may also mean that you’re not yet ready. Just make sure that you have a health plan that can help you when the time comes.
These are all the information that you need to know if you are not yet financially ready to retire. If you checked more than two on the list, then it’s time for you to save and assess your retirement. In this way, you’d be prepared when the time comes and just enjoy life.
Based on Materials from Investopedia
Photo Sources: The Economist, Big Text Credit, Flickr