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With so many factors in play—retirement accounts, debt, lifestyle, and more–It can be tough to know when you’re ready to retire. Even if you’re nearing the age when you wanted to retire, you might not be sure if you’re financially and emotionally ready.
Fortunately, there are signs and benchmarks that can help you know it’s time to retire. Here are some signs you might be prepared:
There are a few key things to consider when it comes to your financial health and retirement readiness. One important factor is whether you have enough money saved up. This means figuring out how much you plan to spend per year in retirement and how much you have in all your retirement accounts.
It can be helpful to ask work out what your costs will look like in retirement—for example, will they be the same, or will you move somewhere less expensive to live? It can also be useful to have a plan for how you’ll strategically withdraw from your retirement accounts to cover your expenses.
It’s important to have the right insurance in retirement. Medicare kicks in at 65, but if you retire before you’re eligible, you may want to purchase a separate health insurance plan.
If you have a permanent life insurance policy, such as universal or whole life insurance, the cash value component can be useful in retirement. It can become a source of stable funding that may help you during market downturns. It can also help you manage taxes.
One of the last things you’ll want to think about is your debt. Having paid off any outstanding debts—this means car loans, mortgages, and credit card debt—is a sign you may be in good financial health and ready to retire.
Some people opt to retire with mortgage or other debt. If you plan to continue paying off debt after retirement, it’s important to make sure the payments fit into your new income and budget.
It can be difficult to retire if you’re still financially supporting other people. If you’re supporting kids, grandkids, or other relatives—and planning to continue doing so—it’s important to understand how this will factor into your finances post-retirement.
Retirement is a time to enjoy your hobbies, travel, and spend time with loved ones. You’ll have more time to socialize than before. If you don’t have close friends or family nearby, it may be worth considering a retirement community or another type of social setting.
Finally, consider what you want your lifestyle to be like in retirement. Do you want to downsize? Do you want to travel? How do you want to spend your time? Do you have a hobby or something else that you love? When you’re thinking about these things, consider how much different choices cost (or save).
Retirement is a time to enjoy life, so make sure you have a plan for how you’re going to spend your time.
Of course, everyone’s retirement is different. There’s no single answer to whether you’re ready to retire. It’s possible that you checked all the boxes above and just don’t feel ready to move on to the next phase of life. But if your finances are in good shape and you feel emotionally prepared to retire, you may be on the right track.
