What are the signs that you’re ready to retire? Here on the Blog, we’re always on the lookout for information that can help you answer the question, “Am I ready to retire?” Several weeks ago, for example, we featured an article that asked the question, “What if I retired today?” The whole idea is to get you thinking about more than your bank account when deciding if and when you are ready to retire.
This week, we’re continuing the theme of retirement readiness by taking a second look at this 2022 US News article in which reporter Rodney Brooks gives us some vital signs – six in all – that can help us answer the question, “Am I ready for retirement?”
Clearly, each of us is different, and there’s no simple test to gauge your readiness for such a major life transition. But if you, like many of us, are wrestling with the preparedness issue, this article can be a helpful conversation starter with your spouse or partner, or a catalyst for deeper reflection on your own. One thing we like about Brooks’ list: only three of the six “retirement readiness” questions are financial.
With that in mind, take a look and see how well these six signals apply to you.
Ready to Retire: Watch for Telltale Signs
When do you know for sure that you’re ready to retire? Is it about age, financial readiness, a certain life or professional goal reached, or none of the above? In his US News article, reporter Brooks writes, “There are signs and targets that can signal that you are prepared to retire, but they’re not all about your age and how much money you’ve saved.”
Brooks spoke with Jamie Hopkins, a retirement planner with the Nebraska-based Carson Group. Hopkins agrees that true retirement readiness goes deeper. “Getting ready to retire isn’t just about finances,” he says, “it’s about being emotionally ready as well.”
According to Brooks, the following are the six signals to tell you that you are nearing retirement readiness.
Ready to Retire When You Are Financially Prepared
As this first – and most obvious – retirement signal suggests, financial preparedness is all about having a realistic picture of both the actual living costs associated with your unique retirement situation, and a clear grasp of just where you will get the income to cover all of your expenses. That’s what makes “financial preparedness” unique from one retiree to another.
Hopkins explains, “Retirement planning is not about saving to hit a magic number, it is about income. So, you need to know what your savings, pensions, Social Security and other assets can generate in income, and if this income will meet your retirement needs.”
The danger, Brooks warns, lies in making careless assumptions. In other words, he argues, don’t make the mistake of reaching your pre-determined retirement age and assuming that you’re ready to retire when you haven’t saved enough to maintain a comfortable life without work. “Working a bit longer is typically the single best way you can improve your retirement income security,” Hopkins told Brooks. “Working just six months longer can be like saving an additional 1 percent to 2 percent of your income for 30 years.”
Ready to Retire When You Have Eliminated Debt
A big part of a healthy financial picture, especially when it comes to the balance of expenses and income, is to get rid of as much outstanding debt as you possibly can, the article says. That’s why debt elimination is such a high priority.
“Outstanding debt makes it especially difficult to retire because you have to pay for past as well as future expenses,” Brooks writes. “While some people maintain a mortgage and car loans in retirement, it’s best to eliminate outstanding loans, high-interest credit card debt and student loans before you retire. Having low or no debt allows you to use your savings and retirement income for current expenses.”
Another financial planner, Ken Moraif of Retirement Planners of America, put it succinctly in his conversation with Brooks: “Put together a game plan, get organized, pay off your mortgage and fund your 401(k).” Sounds simple…but it takes work. We also suggest consulting with your financial planner and working with him or her to develop a personalized financial dashboard that will help you achieve your goals, no matter what the future holds. Contact us at AgingOptions and we can tell you more.
Ready to Retire When You Have a Plan to Cope with Emergencies
Having a financial plan that’s too rigid and too tight doesn’t allow for emergencies, Brooks warns – and an emergency is something everyone has to deal with at one time or another. It’s vital to make sure you can not only cover your bills and live a comfortable life, but also have enough saved up to deal with the occasional crisis that pops up. You need strategies in place to meet those crises with confidence.
“What people worry about in retirement is the unknowns,” says Greg Hammer, president of the Indiana-based Hammer Financial Group. “If you have a plan, you won’t panic when events occur. You should have a plan for when the market crashes, a plan for when a spouse passes or when a catastrophic event happens.”
This is about having an emergency fund set aside – ideally six to twelve months’ worth of living expenses at a minimum. It also involves other types of emergency planning including drafting powers of attorney and other documents, as well as helping your loved ones understand how to take care of you should you fall ill. If you’ll contact us at AgingOptions, we can suggest some steps to help you be better prepared for whatever emergencies come your way.
Ready to Retire When You Have Health Insurance
The US News article reminds us of a critical fact that has to figure into your retirement timing. If you’ve gotten used to the convenience of employer-provided health insurance, either provided by you or your spouse, the time to consider what replacement health insurance you’ll purchase is before you retire.
Medicare is the go-to plan for seniors, but if you retire early, it’s not an option. “Many people wait until age 65 to retire so they will qualify for Medicare,” Brooks explains. “Those who retire before age 65 must pay out-of-pocket for replacement health insurance.”
Understanding your options and starting the research now will make the jump easier when you near the time you plan to retire. Moreover, the sheer number of choices is vast, so don’t put it off. Start investigating health care choices before you leave your job.
Ready to Retire When You Have a Social Network
Let’s face it: for many of us, our jobs are our social identities. It’s where we meet and befriend people and our coworkers are often the people who we see the most every day. If your job is a huge part of your identity, retirement will include transitioning out of that identity into something else.
If you take a close look at your social circle and they are all coworkers or business associates, it may be a good idea to start now at building a new community outside of work. After all, as we heard psychologist Wayne Dyer say once, “If you are what you do, then when you don’t – you aren’t!”
Retirement planner Ken Moraif explains, “Once you are not at work anymore, you lose that social network. You won’t be around them. You won’t have lunch with them. You’ll miss the company trip. That’s all gone. The whole social side of going to work that’s been such a big part of your life is coming to an end.”
Ready to Retire When You Have Something Else to Do
Ultimately, retirement isn’t a purely financial decision, US News reminds us. It’s primarily a psychological decision, an emotional decision, and a lifestyle decision. Walking away from a job that has supported you, sometimes for decades, can feel like a certain kind of grief.
Moraif has become used to this balance of the emotional side of retirement, as he has many clients who are financially ready but keep choosing to delay it as their chosen retirement date grows closer. “Sometimes it takes them another six months to get psychologically prepared to retire,” he told Brooks from US News.
To prepare for the emotional aspect of retirement, Moraif suggests taking it for a practice run—trying out different activities you might want to do later—and turning the fear and anxiety into a vision of excitement for the future. “Don’t do it cold turkey,” he says. “Figure out what you want. What charities or what communities do you want to work for? Who are the people you need to contact? Picture what your retirement will look like.”
Breaking News: Rajiv’s New Book is Here!
We have big news! The long-awaited book by Rajiv Nagaich, called Your Retirement: Dream or Disaster, has been released and is now available to the public. As a friend of AgingOptions, we know you’ll want to get your copy and spread the word.
You’ve heard Rajiv say it repeatedly: 70 percent of retirement plans will fail. If you know someone whose retirement turned into a nightmare when they were forced into a nursing home, went broke paying for care, or became a burden to their families – and you want to make sure it doesn’t happen to you – then this book is must-read.
Through stories, examples, and personal insights, Rajiv takes us along on his journey of expanding awareness about a problem that few are willing to talk about, yet it’s one that results in millions of Americans sleepwalking their way into their worst nightmares about aging. Rajiv lays bare the shortcomings of traditional retirement planning advice, exposes the biases many professionals have about what is best for older adults, and much more.
Rajiv then offers a solution: LifePlanning, his groundbreaking approach to retirement planning. Rajiv explains the essential planning steps and, most importantly, how to develop the framework for these elements to work in concert toward your most deeply held retirement goals.
Your retirement can be the exciting and fulfilling life you’ve always wanted it to be. Start by reading and sharing Rajiv’s important new book. And remember, Age On, everyone!
(originally reported at https://money.usnews.com)