Retirement is not just about lazy mornings and refreshing vacations. It is not only about waking up late in the morning without worrying about office work. Retirement is also about planning your finances meticulously so that you can lead a comfortable life with your family. But how do you know if you are not yet financially ready to retire?
Are you in your fifties and just starting to save for retirement? Do you know if you are financially fit enough to retire? If no, then this article is for you. Today, we will talk about how to determine if you are financially ready to retire. The decision is a tough one. We will help you to make the right decision.
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Signs You Are Not Ready to Quit the Job and Retire.
Here are a few tell-tale signs that you are not yet financially ready to retire.
1. You are immersed in debt problems and cannot pay bills:
Debts can drain your savings after retirement. The monthly payments and interests can eat up your savings, and you can be in a big financial problem. Check if you need help for excessive debts. If you do need help to tackle your excessive debts, then it implies that you are not financially ready to retire. Try to reduce or eradicate your debts before retirement. If you have to work longer than what you have planned, then also it is okay. At least, you will not have to worry about debts or collection calls after retirement. You can also save money and do good for your long-term finances.
Pay off credit card debts, auto loans, medical bills, mortgage before you retire.
2. You have not yet figured out your healthcare expenses:
Healthcare costs are a huge expense after retirement. It is a myth that health care costs won’t be large part of retirement costs. If you are planning to retire before turning 65 years, then you should have a separate plan to meet your healthcare expenses. You will qualify for Medicare after turning 65 years old. But if you retire at 61, how will you cover your health care expenses? Health insurance is quite costly. Depending on your medical condition, you may have to pay around $1000 per month on the insurance premium.
What if you retire after turning 65?
Yes. You will qualify for Medicare. But is that enough? Medicare will not cover your entire healthcare expenses. So, you have to set aside money in your budget for additional health care expenses. Have you set aside that amount of money? Remember, healthcare expenses include a lot of things like eye care, dental care, copays, home care, and so on.
If you have not planned for your healthcare expenses yet, then you are not financially ready to retire.
3. You have not yet planned for your living expenses:
Do you know how much you will need to cover your living expenses after retirement? Do you know the exact amount you will need to lead a comfortable lifestyle? If you have not yet thought about it, then you must start calculating your projected expenses after retirement.
Do you plan to travel extensively post-retirement? Do you want to visit your grandchildren often? If so, then you have to include those expenses too. You must have an idea about how much you have to spend every month. Create a budget to know how much you need to afford your current lifestyle. That would give you a general idea about how much you may need to survive after you retire. Evaluate your retirement investments and savings to know if you have set aside enough money to retire.
Experts recommend individuals to live off around 75% of their pre-retirement income to lead a similar lifestyle. But that is only a general rule of thumb. You have to consider many other factors. For example, the tax you may have to pay on your withdrawals depending on your retirement savings plan.
4. Your children are still financially dependent on you:
COVID-19 has changed the economic scenario of the country. Many individuals have lost jobs in the last few months. Many international students have been forced to come back home. As COVID-19 remains unabated, there is surety when everything will be normal again.
Have your children come back home after the pandemic? Have they lost jobs and are living in your home now? If so, then your living expenses must have increased by now. In that case, you need to reevaluate your retirement plans. Retirement is about living on a fixed income unless you decide to do a side hustle or become an entrepreneur.
If you have to cover the living expenses of your children for an extended period, then it is not the right time to retire. When you retire, you should not worry about how to lead a comfortable life while scraping money for your adult children. Postpone your retirement for a few years until your adult children are financially strong enough to cover their own expenses. You can even think about doing a side gig to accelerate your retirement income.
5. You are only dependent on your Social Security income:
You can get a rough estimate of your Social Security benefits from my Social Security account. Usually, Social Security benefits are calculated based on your income and work history. Calculate the amount you will receive from Social Security benefits every month after retirement. Is it enough to cover your living expenses? Can you support your current lifestyle with that amount? What if your Social Security benefits go down? These are pertinent questions. You can work and collect Social Security in some cases but not always. Making retirement plans based on Social Security benefits is not a wise idea. You need another plan for your retirement. And if you are planning to spend your retirement life solely based on your Social Security benefits, then you are not yet financially ready to retire.
6. The thought of retirement makes you feel perplexed:
If the very thought of retirement worries you, then try to find out the reason behind it. Are you a workaholic? Is that the reason why you do not want to retire? Or, the reason is something else? See, if you are a workaholic, then that is not a problem. You can do many things after retirement to keep yourself busy. For instance, side-hustle on something you are passionate about. You can also turn into an online entrepreneur.
However, if the reason why you get worried about retirement is money, then that is something you need to think about. Have you received a pay cut due to the pandemic and cannot contribute to your retirement savings plans like before? Have you lost your job, and that is why you cannot build your nest-egg? Well, these are a few practical challenges that millions of people are facing in the country. If you are facing these challenges, then it is better to postpone your retirement by a few years.
Conclusion On Not Yet Financially Ready To Retire
Last but not least, you have to consider the extra or unforeseen expenses that you may have to bear after retirement. Otherwise, your retirement savings may get exhausted sooner than you expected. You should plan ahead to ensure that you are ready for a financially secure retirement.
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Stacy B. Miller is a writer, blogger, and a content marketing enthusiast. Her blog vents out her opinions on debt, money and financial issues. Her articles have been published in various top-notch websites and she plans to write many more for her readers. You can connect with her on Facebook and Twitter.