What's In This Article?
The question of retirement is one that is on the minds of many Boomers. Even those who are still youngsters in their fifties are starting to think about this fast-approaching milestone.
Most of the time, discussion around retirement focuses on the financial aspects, but there are many other things to consider before moving on to this stage of your life. Retirement can have an emotional effect and it can affect your family. Here are a few of the questions you need to ask yourself in answering the question, “Am I ready to retire?”
Financial Questions to Ask
Culture has ingrained the idea that 65 is the age of retirement, but for many, this is neither realistic nor true. When you can retire is a personal matter, and there are many different factors to weigh. Here are a few questions that you should ask to see if you are financially fit before making the decision.
How stable is your financial situation?
No one should even consider retiring if they are not financially stable. If you are struggling to pay your current bills, then retirement should be out of the question. If you can generate income from things such as social security, pensions, 401(k)s, savings, and IRAs, you need to know if it will be enough. Most need about 75% of their pre-retirement income to live comfortably. You want to be able to meet your obligations and have some left over to enjoy some of your time, too.
What expenses will increase and which ones will decrease?
When you retire, there are many things that you will no longer need to account for in your monthly budget. For instance, you will no longer need as many clothing expenses, gasoline for the daily commute, or parking garage fees. You will be eating lunch at home, and you will no longer need to pay fees for professional organizations and licensing.
You will also no longer have employer-provided healthcare, and you will probably want to spend more on entertainment or travel. You need to make a list and write down a post-retirement budget to see if retirement is realistic for you. If it is not feasible in your current circumstances, you might be able to find ways to make it work, like by taking on a part-time job or starting your own business to fill in the gap.
Do you have high levels of debt?
High levels of debt can ruin your dreams of spending your days stress-free in retirement. It can transform retirement from a blissful dream into a nightmare. With less money coming in, meeting the demands of high-interest rates and making payments can be difficult. The main debts that you need to reduce are credit cards, car payments, and you should consider paying off your mortgage or downsizing.
Having a blissful retirement is all about cash flow. You can increase your cash flow by increasing your income or reducing your debt. The less you have to pay out when you retire, the more you can enjoy your time doing the things you always dreamed of when you got to this stage in your life.
Do you have any plans for major expenses in the future?
If you are planning to buy a vacation home or get a new car, after you retire is not the time to do it. You should take care of these things and get them paid off while you still have a higher steady income. Remember that if you are planning to use the money that you saved, the money that you withdraw might be taxable. It is always better to plan for major expenses when you are thinking about retiring. You also want to have a little extra for those unexpected expenses that crop up in life.
Do you have a solid financial plan?
This year, the pandemic has caused many to consider retiring early. There have been changes in their jobs, and many who used to enjoy their job no longer do. It can be tempting to just walk out the door and call it quits. This can be a devastating emotional and financial decision if you have not made a financial plan for how you will meet your monthly expenses.
Even though the idea of not having to get up every morning and go face the rat race is a highly lucrative proposition, you can quickly realize that you did not plan for your financial future. This can leave you in a bad position quickly. Before you walk out the door, make sure that you have a solid monthly plan and that you have a backup plan in case things do not go as planned.
Have you accounted for changes in the economy?
When planning for retirement, you need to consider both the short-term and the long-term effects of the economy. You need to know how long your savings will last. In making these calculations, you need to account for inflation and changes in the economy. You might want to talk to a financial advisor about rebalancing your portfolio so that is more in alignment with your current needs. The answer to the question, when can you retire depends on having a solid plan in place.
How will you pay for healthcare?
This is a question that you must ask before you retire and have a solid plan. Even if you are in good health now, this is likely to change in 25 or 30 years, or sooner. You do not want medical expenses to wipe out everything you have saved or put you in a financial bind. This is one worry that you do not want and one issue that can destroy your retirement dreams quickly. Planning ahead of time is the key.
Financial concerns are the main thing on many people’s minds when they ask the question, “When should I retire?” When answering the question, “Am I ready for retirement?”, you need to look beyond the financial aspects. Perhaps you have been ready to walk out the door for quite some time, but many people who do this in response to a temporary situation or emotional response regret it later. Before you are ready to retire, you need to ask these questions and answer them honestly.
Does any part of retirement scare you?
If feel anxiety about meeting your financial needs or about any other aspect of retirement, you should only retire when you have resolved these issues. Retirement is a big shock to the system. For many years, you have had the same routine, and you knew that this routine would provide for your needs.
Although not having to wake up to the alarm clock sounds blissful, it can also be stressful. You wake up and you do not know what to do. If you have not planned your days, it can significantly affect your sense of security. You need to resolve all of the issues that are troubling you before you turn in your notice.
Do you still love your job?
If you do not love your job, the decision to leave can be a little easier, but if you love your job, it is a hard goodbye. Maybe you have built strong friendships over the years and you consider your coworkers as part of your family. After the retirement ceremony, they will go back to the way things have always been, but you will not be a part of it.
You will go on to a new adventure and your old friends will not be a part of your daily life. It is a lot like graduating high school or college. Some of the friends that you have made will still be a part of your life, but others you will never see again.
Many people find themselves unprepared for the emotional impact of retirement. It is a happy beginning, but it is also many sad goodbyes. Some retirees even find themselves in a grieving process over the losses. Everyone is different, and your reaction depends on you and your relationship with your coworkers. The main point is to be prepared for the experience as much as you can.
How much will you miss not going to work?
We get more from our jobs than many of us are willing to admit. The good news is that today, we have social media, so you can still keep up with many of your old friends from work. One thing that can happen is that you can end up losing touch because you are no longer a part of the same world. This can be another difficult emotional situation that you might not have expected.
The key is to stay active and find something that you like to do. You will get out and meet new friends in no time. The time to ask yourself this question is on Sunday night when you are preparing for another work week. Are you looking forward to seeing friends and coworkers, or are you dreading another tedious week of drudgery? If you still love your work and the people you work with, then it might be a good idea to stay for a while longer.
What will you do in retirement?
For many of us, our identities are wrapped up in what we do for a living. That is one of the first questions that you ask someone when you meet them for the first time. When you no longer have that anchor in your life, you need to think about how you will build a new identity when you retire. You need to spend some time envisioning how you will spend your day. Will you spend more time with your family? Do you want to travel? Would you feel fulfilled in a volunteer position or serving the community?
It is important to remember that when you are thinking about retirement, you are moving toward something and moving away from something else. It is not the end of your life by far, and retirement can be the best years of your life. It is suggested that you spend at least a year thinking about what you want to do after you retire before you make the move.
The key is to cultivate new plans and dreams so that you do not end up sitting around bored regretting your decision. This might seem like something you have heard before, so what do you want to do when you grow up? What is your plan for the next phase of your life? When it comes to retirement, you have many more choices than when you were younger.
Is it time to start your own business or follow your own dreams?
Maybe full retirement is not the answer. Perhaps your employer has an option for partial retirement. This can be a great way to transition into full retirement later, but not all organizations have this option. Another thing to consider is that maybe it is time to quit the corporate world and strike out on your own.
You have many years of experience, and this can be a valuable asset for starting your own company. Do you have a dream business that you always wanted to pursue but never had the time? Maybe you have a hobby that you would like to turn into a small business. This can be a great option for keeping you engaged, doing something that you love, and providing some supplemental income to help out. We are fortunate in this respect because we have online options available to us that our parents did not have. You might want to consider the possibilities of retiring from the corporate world while you build a business of your own.
As you can see, retirement is not for the weak at heart. It is a big change financially, and you have to define who you are as a person. It means a change in routines and a change in priorities. Popular media has built this fantasy around retirement and what it means. They have presented it as the American dream, but if you do not plan for it properly, or you have not asked yourself these hard emotional questions, then retirement might have a few surprises. The most important thing to do before you make the big decision is to make sure that you are prepared in all areas of your life.