Choosing to retire is a deeply personal choice. Some workers may be ready to stop working tomorrow, but others may be a bit too reluctant to throw in the towel.
Chances are, you may have a bunch of questions swirling around your head about the logistics of retiring, especially concerning your finances. It’s all too common to question if you are financially ready to retire – you’ve been saving up for this moment your entire life, but how much money is enough?
Unfortunately, there’s no one right answer to this question. Finances are extremely personal, so it makes sense that this answer could vary for everyone. So instead of being paralyzed by the fear of the unknown, take a look at some of these financial signs that you are ready to retire.
Read on to determine if you are ready to take that leap.
7 Financial Signs You Are Ready to Retire
In order to cover all of your financial bases, here are seven financial signs you may be comfortable retiring.
1. You’re Debt Free
You don’t want to worry about making large recurring payments during your retirement. This means not having a mortgage, a hefty car payment, and huge amounts of credit card debt. While we understand that you will need to make larger purchases during retirement, entering retirement without debt is a great way to start off on the right foot. Plus, this will keep your savings available in case of an emergency.
2. You Won’t Be Dependent on Social Security Benefits
Social security benefits are a great supplement to your savings and should be viewed as such. Your goal should be to see your social security benefits as just the icing on the cake, and not something you need to survive.
Take time to crunch the numbers and if you would be depending on your estimated social security benefits too much, then we recommend you stay working for a bit longer to beef up your savings.
3. You Can Access Your Savings
Some savings accounts, like 401(k) accounts and other qualified retirement plans require you to be a specific age before you can make withdrawals without a penalty. Also, keep in mind that depending on the savings account, you may have to pay income tax on the balance on your withdrawals.
For some individuals, these financial penalties can really make a dent in their retirement savings. Make sure to speak with one of our financial advisors about the options available to you before you make the decision to retire.
4. You Understand Your Healthcare Costs and Options
Healthcare is a massive expense in retirement, especially if you choose to retire before you become eligible for Medicare at age 65. While there are other options, like being covered by your spouse’s insurance or enrolling in COBRA, it’s best to understand all of your healthcare options.
We recommend going through your healthcare costs from the past few years to get a good estimate of what you potentially will have to spend annually. Factor in your regular prescriptions and treatments, as well as any potential operations you may need to have in a few years like a knee or a hip replacement. This number will give you a good idea of how much you’ll have to spend monthly if you choose to retire early before Medicare kicks in.
5. Your Children Don’t Rely on You Financially
When creating your retirement budget, you’ll need to know how many people to plan for. Typically speaking, you can make the most out of your retirement savings accounts if you don’t have any dependents besides your spouse.
If you do have children that rely on you financially right now, evaluating how well they would fare without your help is an important step in deciding when to retire.
6. You Have Saved for Retirement in Many Places
It’s always best to diversify your savings accounts so you can get the biggest return on your investments. You need to view your retirement savings as your new income stream, and it is always best to have multiple options. This is also helpful if you decide to retire early, as you may not have a withdrawal penalty on some of your accounts.
Plus, different savings methods like property investments and high-yield savings accounts have different ROIs. So if you split your money into different pools, then you can get the biggest bang for your buck when diversifying.
7. You Have Created a Comprehensive Budget
We get it, planning a budget for basically the rest of your life can be stressful and overwhelming. It can be very hard to determine exactly how much cash flow you would need, and it can be hard to project any large emergency expenses.
But that’s where our holistic financial planners at Second Opinion Partners come in to help. We are here to take a look at the big picture of your finances and to set you up for financial success down the road. Our advisors understand that finances are incredibly personal, and it is important to consider your financial goals when creating a budget. We’ll take a look at every detail of your financial life, and help you plan, create, and execute on a budget that works for you and your family.
When you work with us, you can be confident that your finances will be as prepared as possible for your retirement. It is our goal to get you to a place in your life where saving and budgeting for retirement comes naturally, so you can be prepared to retire at any age.
Not sure where to start when it comes to determining if you’re financially ready to retire? Our financial advisors are here to make planning easy for you, so give us a call today.