8 Signs You Aren’t Financially Ready to Retire
For many Americans, it is not easy to determine the right time for retirement. A few financial flags may help you know whether transitioning into retirement is a bad idea.
25% of retired Americans feel that their retirement was a mistake, financially speaking. This is according to a poll that was carried out by Associated Press-NORC Center for Public Affairs Research in 2019.
The following signs show that you are not financially ready to retire and how to remedy them.
High Debt Loan
Focus on paying off that huge debt before you start thinking about retirement. If you are earning $5000 per month and have to pay a monthly credit card balance of $1000, get rid of that debt. So once you retire, you won’t have the additional $1000 expense every month.
That amount from your retirement income can go to other things. Without debts to pay, you will live comfortably for longer on your retirement savings.
No Spending Plan for Retirement
How will you know what amount to save if you can’t figure out your retirement living expenses? Consider your retirement lifestyle carefully and create an ideal monthly budget. If you plan on seeing your grandkids more or traveling you need to know how much that would cost you.
With a monthly budget setup, look at your savings and investments to see whether or not you are ready to retire.
Failure to Account for Health Expenses
If you retire before you are eligible for Medicare (65 years old), figure out a separate plan to cater for your health expenses. Health insurance is anything but cheap. Expect to spend over $1000 a month.
Even though you are 65 and eligible for Medicare when you retire, you’ll still face difficulties. Medicare won’t cover all your medical expenses. So make sure that your retirement budget includes health costs.
Depending on Social Security
Social Security benefits will not really be sufficient to support your lifestyle after retirement. Besides, the benefits can be reduced. Other than Social Security, you need another solid retirement plan.
No Mortgage Plan
How much longer do you have to pay your mortgage? This will probably be your most consistent and largest monthly expense once you retire. If you don’t have a plan on how to handle it, you better continue working.
A good option would be to sell the home then downsize in retirement.
No Investment
It is one thing to have several investment vehicles. Understanding how they bring in income is another. Having many of them does not necessarily mean that you have a plan. Talk to a financial advisor. Let them assess your investments and help you create a viable plan.
Still Supporting Your Kids
It is not wise to retire if you are still supporting your children financially. Those expenses will strain your retirement budget. Maybe wait until the kids are financially independent.
Extra Expenses
Your retirement plan may be perfect but don’t forget that things can come up unexpectedly. You may have to repair the house, pay higher health costs or inflation may happen. It is important to have an emergency fund.
