How to Know If You’re Ready to Retire

An Asian senior couple meet with a financial planner to determine if they can comfortably retire.

Ready, set, retire? Knowing the right time to retire will make all the difference.

It’s always shocking when that first letter from AARP comes in the mail, shortly after your 50th birthday. There’s no way you’re ready to retire. You’re still young! You’re just out of your 40s! Retirement still seems so far away.

As the years go by, though, and you find yourself approaching your 60s, retirement seems closer than ever. You’re still not ready; you’re planning on being one of the increasing number of Baby Boomers who will wait to retire until their 70s. But retirement isn’t as easy as it was in the days of our grandparents, when you got a gold watch when you turned 65 and headed out the door.

Increasingly, there are fewer older adults retiring at 65, choosing to work well beyond the “traditional” retirement age. Even if you’re in that group of Boomers waiting to retire until absolutely necessary, it’s still important to give serious thought to retirement and ask yourself some important questions, questions that’ll help you decide when you’re ready to retire.

1. How much money will you have when you retire?

One of the biggest reasons those hitting traditional retirement age continue work is the feeling their savings, pension and Social Security won’t stretch enough to make ends meet every month. So, how much do you need in savings to be able to retire?

The first place to start is to look at your monthly expenses. As you get older, your expenses should decrease. Your home will be paid off. The kids will be off on their own (hopefully). Your property taxes will no longer increase, as you’re — pardon the term — grandfathered in at the rate they are when you reach age 65.

Additional discounts are available to seniors from utility companies, restaurants, cellphone providers and so on.

Once you determine your base expenses, take a look at what your anticipated monthly Social Security amount will be. At least annually, the Social Security Administration sends out a mailing with your monthly income from them if you retire at 62, if you retire at 67 or if you wait until 72. It also shows what your monthly payment will be if you end up needing to take Social Security Disability or what your spouse could expect, should you be the first to go.

Your next trip should be to your employee benefits department, if you’re working for a company providing retirement, or to your investment broker, if you’re covering your own retirement funds. They’ll be able to give you the same figures, based on today’s interest rates, of what to expect if you take early retirement versus retirement on time or delayed retirement.

If you’re self-employed and haven’t put much into a retirement account, now’s the time to sit down with an investment advisor to start making regular contributions, so you’re not being forced to work past age 75.

All this boils down to the big question: will you have enough money to live when you want to retire or will you have to work longer to make ends meet? This retirement calculator from AARP can help you determine your finances — current and future.

2. Where are you going to live?

For most, the reality of retirement comes down to figuring out where you are going to live. Once retired, most active adults would prefer to stay in the home they’ve lived in most of their lives. If that’s the case, the answer to the question is quite simple.

If you’re looking to move after retirement to downsize or move to a better climate, figuring that out now, before you consider retiring, is important. The “where” will be a major factor in your expenses, especially if you’re downsizing or moving to an area where the cost of living is much higher.

Another consideration will be whether you are going to buy or rent. Do you want to live in your own home or would you rather be in a senior-only center? House or condo? Apartment or assisted living? The answers to those questions will determine if you’re ready to retire. When you’ve decided, take a look at NewHomeSource to find the right 55+ new-home community for you.

3. How’s your health?

With age, you will start to pay for all the crazy things you did when you were younger. Remember when you broke your ankle when you went skiing in Aspen when you were in your 20s? Your ankle will make sure you remember the closer you get to retirement age. And it’s not going to get any better from there.

What is your family health history? Did you have grandparents and parents who lived into their late 70s and 80s? Does arthritis, heart disease or cancer run in your family?

The older you get, the more you’ll need to set aside for health-related expenses. While Medicare will pay for some expenses, to be fully covered on all your medical costs, you’ll need to enroll in a Medicare supplement program, at the very least, and have medical-related savings to cover what the other two don’t.

4. Are you and your significant other on the same retirement page?

Of course, the best time to retire is when you and your significant other are on the same page. In years past, there was always the joke about the retired husband driving the stay-at-home wife crazy because he’s under her feet.

Today, there’s as much chance both spouses are working well past “normal” retirement age. And being on the same page with your loved one when it comes to retirement can make the overall retirement experience that much better. You can find more information about retirement and spousal benefits from the Social Security Administration’s Retirement Planner page.

So, what about you? Are you ready to retire?
Laurie Leiker is a published author, business coach and consumer advocate. She spent 10 years as producer and on-air investigator for the Troubleshooter Tom Martino radio show in Denver, Colo., where she helped consumers get back more than $2 million in one year.

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