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After putting in decades of hard work in your career, saving money for retirement, managing your home, and planning your financial future, the time has come when your daydreaming about retirement may soon be a reality.
However, for some, the idea of retirement can still be nerve-wracking and full of a lot of second-guessing and hand-wringing. If you are feeling this way, don’t fret: 40 percent of the U.S. population is worried about outliving their savings after they retire.
With so much to consider, how do you know when the time is really right to retire? The answer will be different for everyone, but here are five signs that you may be ready to make the jump.
1. You and your family are on the same page.
Needless to say, making the jump to retirement is a big decision that can be exciting, especially the closer and closer you get to that time. However, if you live with or support loved ones, you should make that decision with them.
In other words, make sure you are planning for your future—and the budget that you will have—together so you are on the same page with your savings goals, post-retirement plans, and worries and expectations for the future.
If you are both in agreement on your plan for the road ahead, you’ve taken a big first step.
2. You’ve hit full retirement age.
Even if you believe that you are mentally, physically, and emotionally ready to retire before you reach what the Social Security Administration and the Federal Tax Code consider to be “full retirement age,” there are some benefits to waiting.
For example, if you were born between 1943 and 1954, your full retirement age for Social Security benefits purposes is 66. And for those born after 1959, you’ll have to wait until you’re 67. Although you could begin to claim Social Security benefits as early as 62, your benefits could be much higher than if you are able to wait until full retirement age. In fact, if you retire as soon as you are able, your monthly benefit payment could be reduced by a staggering 25 percent.
However, if you are able to wait until the maximum retirement age of 70 to claim Social Security, you could receive as much as 132 percent of the monthly benefit that you would have received just by reaching your full retirement age.
3. You have your debt under control.
Notice we didn’t say that you have to have your debt paid off.
That’s an important distinction because, for some, the decision about whether to pay off their mortgage for their primary residence can come with some unique considerations.
However, for other forms of consumer debt, you need to have a plan to pay it off that is manageable, achievable, and sustainable. A large credit card balance, multiple or high car loan payments, and an out-sized mortgage balance can be too much for some on a fixed retirement income to handle, especially if an unexpected expense comes up.
4. You have a retirement budget.
Sure, you want to have fun during retirement—but first, you have to make sure your financial fundamentals are under control.
Take the time now to add up your fixed monthly costs and must-haves, such as your mortgage or rent, groceries, electricity, and other utilities. Next, add in your "wants," such as travel, entertainment, gifts, donations, and meals out.
Once you have totaled up your projected monthly fixed and variable expenses, it is time to confirm that you have enough projected income to cover them. If you do, then you may be in a good position to retire. If not, you may need to take the time to reevaluate your spending, income, and goals with your family and a trusted financial advisor.
5. You have your healthcare coverage covered.
No matter how healthy you are when you stop working, at some point during your retirement years, your healthcare needs will change and likely increase in cost.
In fact, for many in retirement, their healthcare costs can account for the biggest portion of their budget; as reported by Business Wire, Fidelity estimates that a couple retiring in 2021 will need an estimated $300,000 to cover medical costs. (And that doesn't include long-term care, which some may need down the road.)
So if you have been able to account for your healthcare coverage needs—and, depending on your needs, you have met with financial and Medicare advisors to see what your options are for health insurance coverage—then you may be ready for retirement.
Get the support you need from trusted partners.
Nearing retirement can be an exciting time. But you and your family should make sure to take the necessary steps, verify your plans, and evaluate all of your options to ensure that you are truly ready—personally and financially—to make the jump.
It is important to remember that, fortunately, you don’t have to do this planning alone; you can lean on your family and a team of trusted financial advisors to help you find the answers that are right for you and your family.
If you are getting ready to make the jump or if you want to get a second opinion on your plans, we welcome the chance to get to know you. In the meantime, you can learn more about the Harvest Wealth Group team here.
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