Are Your Finances Ready For Retirement?

When you start reaching your late 50s, you start to wonder when would be the right time for retirement. Being able to retire means receiving quality rest without the need to wake up at 6 AM to make it to work and put in long hours each day. If retirement was easy, we'd do it in our 20s. Unfortunately, that's not the case. To determine if you are ready for retirement, you should have a solid understanding of your finances. 

In this article, we'll discuss signs you are not ready for retirement and signs you are ready for retirement. 

Signs You're Not Ready for Retirement 

Struggling to Pay Bills

If you can't pay your bills on time every month, or your bills have become a big stress point, then retiring won't be easy. Right now, you have income. When you retire, you won't have the income to help you pay these bills. 

Aim to have at least 75% of your pre-retirement income for a comfortable retirement. This can come from several sources, such as

• Social security
• Pensions
• 401(k)s
• IRAs
• Savings accounts

If you were lucky enough to receive a 401(k) from your employer as part of their employee retention strategy, you might have a good financial foundation for retirement, but 401(ks) are hardly enough to retire on these days. 

While your commuting costs will decrease, your entertainment and travel costs will likely increase during retirement, so you must retire with enough money. If you're struggling to pay bills with your current income, you can expect to struggle even more after you retire. 

You Don't Have a Plan

Everyone needs a financial retirement plan. This plan should include the ways you'll spend your money, your will, and your estate plan for when you pass away. Remember, you'll stop getting paychecks once you retire, but you'll never stop getting bills. 

Make sure to map out your cash flow before you retire so you know whether or not it's viable. When planning, you should consider when you'll start getting social security benefits and how much you'll receive. You should also determine how much you'll take out of your retirement accounts. 

If you're lucky enough to have both an IRA and a Roth IRA, you'll need to consider the taxes so you can determine which one to take money out of first. 

Your plan should consist of your monthly expenses. Some expenses may decrease while others increase, but it's good to start with at least a rough estimate. 

If you don't have a plan, then now is not a good time to retire. Instead, take the necessary time to map out your finances to plan for retirement. 

You're Not Rebalancing Your Portfolio

Investing is key to helping you comfortably retire. If you took a passive approach when you were younger, then you're well on your way. However, for entering retirement, you might want to consider rebalancing your portfolio every year to focus on generating income and protecting your assets. 

Some things retirees can do are diversify their portfolios, preserve capital, avoid risk, and earn an income. 

You're Afraid of Retirement

If you have any fears about retirement, then that means you may not be ready to stop working. Many people aren't ready to let go of their careers because they've been working for so long. Others are afraid they might get bored or worry they won't have enough money to retire. 

If you're someone who doesn't want to completely stop working, you can consider volunteering for a non-profit that takes up time. However, if you're worried about your financial situation, then it's not time to retire. 

If you are worried about the future of your finances in any way, then you should hold off on retirement for as long as possible or until you feel like you have enough money saved up. 

Signs You Are Ready for Retirement

You Have a Will or Estate Plan 

If you have an updated will and estate plan, retirement might just be right for you. The simple act of having these things demonstrate you're the type of person that plans for the future. While retirement planning is broad, estate planning is more specific and deals with your assets when you pass away. If you're of retirement age, then you need to consider updating your will or estate plan so you have the final say over your financial assets. 

Your Debts Are Paid Off

If all of your debts are paid off, then you're in a good financial position to retire. This is especially true if you've finally paid off your mortgage and don't have any lines of credit, loans, or large credit balances. Having your debt paid off will allow you to worry less about finances in retirement and leaves your savings and retirement income available for fun activities or emergencies. 

Common debts you should have paid off are:

• Healthcare bills
• Outstanding student loans
• Mortgage
• Credit cards

You Have Enough Savings

You should have been saving money throughout your entire life for retirement. Even if you have a retirement account, you'll likely need more in your savings to comfortably retire. If you're someone who made plans and set goals for retirement savings, then you're probably in a good position to retire. If the investment meets or exceeds your goals, then now is a great time to retire and enjoy life. 

If you didn't plan for retirement, you need to calculate how long your savings will last. Depending on your age, you might not be eligible for social security or Medicare, but if you've been saving since your 20s, you might have enough money to retire. Remember, your savings will cover your expenses until you reach the eligible age, so make sure you calculate your cost of living and multiply that by the number of years before you're able to receive social security benefits. 

Essentially, if you plan to retire early, your savings needs to be enough to cover any additional retirement years. 

Are You Ready to Retire?

Now is a great time to check up on your financial health, retirement accounts, and saving accounts. Once all of your debt has been paid off, you have a savings account, and retirement savings account then you can consider retiring. Unfortunately, if you didn't plan well for retirement, you may be a few years off from being able to adequately retire. 

Written by Matt Casadona