As we grow older, there are a number of things to think about. Outside of possible health issues, there are grown children, aging parents and retirement ahead of us. But when are we really ready to retire? Many of us think it’s all about the numbers, the finances. However, this is only one piece of the pre-retirement puzzle.
How to Know If You’re Ready for Retirement
This is first on the list for many of us. But do we know how much we’ll need to retire? Don’t think in terms of total to have by retirement age, think in terms of income. When living on your retirement income, how much will you need monthly and for approximately how long?
Calculate your savings, pension, Social Security and other monthly income (such as passive income like rent paid to you, etc.). Know how much you have or is planned to be accessible to you at the time of retirement.
Debt is Paid-Off
While there are some people who choose to take a mortgage or car payment into retirement with them, it’s most successful to have credit cards and loans paid off. Living on a fixed income for a sustainable period of time will be greatly strained with credit payments. Retirement is about preparing for the costs of the future and not carrying the payments from the past with you.
Know Your Costs
Are you planning to retire where you live now? If so, then you have a pretty good idea of what things cost and how much you’ll spend monthly. But as many retirees choose to retire full time elsewhere on the planet, some research may need to be done. What does rent cost in your dream home (or will you buy a retirement home?) What about items like groceries, health care, insurance, vehicle costs and maintenance?
If you’re planning to retire outside of where you currently live, due diligence and research will take you far and avoid any unpleasant surprises.
Other than overall health care costs such as insurance, consider things like medication, out-of-pocket expenses, Medicare and if you need a caregiver in the home for yourself or your spouse. For caregiver related costs in South Florida, you can contact CareGivers of America here: Contact or call us toll free: 800-342-4197
Be sure to have a certain amount set aside for emergency expenses, such as needing a new vehicle, family emergencies or natural disasters.
Create a Budget
Armed with knowing what you’ll have available financially and the knowledge of approximate costs in the area of the world you want to retire, your next best step is to create a monthly budget. Many people have never lived on a monthly financial budget, so this may be new. Practice living on a budget while you’re still making an income and this will help you to build the financial muscles to do so later on. Crunch the numbers and thank yourself later. How to Make a Retirement Budget
Love of the Job
Do you love or hate your job? This can come as a surprising question. Culturally in the U.S., there is an expectation of retirement in the mid-sixties. but retirement doesn’t have to happen at a predetermined age. If you’re currently in a job you love, you may not want to leave fully. Do you just want a bit more free time to pursue personal interests? Perhaps taking the work you love to a part-time business or negotiating a different schedule is the answer. Think creatively.
If you don’t love your job but do enjoy working, perhaps you need to search for different work instead of just stopping altogether. This is the prime time for many who decide to have a “second-career” in a field they love. Finding satisfying and enjoyable work (even part-time) can stretch your income and budget for the future.
What Will I Do?
Beyond the financial math to be done, choosing to retire is also a psychological choice. What will you do with your time? You may want to travel, volunteer, take up some new hobbies or work on the book you always wanted to write. Some of these decisions may affect the budget you create, but taking the time to come up with a plan will help to offset feeling lost and without an identity (which can often be associated with our work).
Are you near, under or over “retirement” age? While there isn’t a “best” age to retire, keep in mind the guidelines of Social Security. You may start receiving benefits at age 62, but this will be a reduced amount. To determine what the age is for full retirement Social Security, click here.
Spouse is On Board
It may come as a surprise to your partner that you’re considering retirement and this can cause strain on the relationship. While the timing of your retirement doesn’t have to line up with your spouse’s, it’s best to have open communication about expectations and the reduction of the household income.
Deciding to retire is one of the biggest decisions that we’ll make in our lives. Research, forethought, and careful planning will help it to go more smoothly. It might just be the most enjoyable time of your life!
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