Retirement: it’s what many people dream of for most of their working lives. Whether it’s because they’re looking forward to traveling the world, spending more time with grandkids, or just not having to commute anymore, there’s a lot of reasons why people are anxious to retire.
However, it can be hard to know for sure whether you’re ready to retire. A lot of financial preparation has to be made in order to ensure that you retire comfortably, happily, and with enough savings to ensure you maintain the quality of life you deserve. Let’s review a few of the ways you can figure out whether you’re ready to retire.
Assess your age and retirement accounts
Some people seek to retire early – for instance, the FIRE movement (financial independence and retire early) consists of young people who strategize the ways they can leave the working world and enjoy their retirement early, often as early as their late 30’s or early 40’s.
Or, you might be in your late 50’s and thinking about leaving your career a little early in order to spend more time with family, or travel to far off and exotic destinations before you’re too old to thoroughly enjoy them. Whatever the case may be, it’s important to assess your retirement account savings to make sure that you have enough to take the plunge.
Pro tip: Some retirement accounts, like the common IRA or 401k, may issue penalties for early withdrawals. If you are using one of these savings vehicles for your retirement investing, be sure that you’re eligible to withdraw without penalties at the age you hope to. Additionally, some companies offer plans that match your retirement contributions, like the Chevron esip, so be sure to look into all saving options available to you so that you can maximize your retirement funds.
Calculate your monthly expenses, then multiply by twenty years
How can you figure out how much you’ll need to retire? First, calculate your average monthly expenses. This includes everything from rent and groceries to clothing purchases and car payments.
Add together everything you regularly spend on in a month, then add a little cushion for those just-in-case emergencies. Then, once you have that number, multiply it by 12 for a year, then multiply that by about 20 years to account for the rest of your retirement.
This is the amount you’ll need to have access to on a monthly basis once you retire. And, without that paycheck from work, it might be hard to make ends meet. Especially when you factor in the fact that, as you age, it’s more and more likely that you’ll have to spend a larger proportion of your income on medical expenses.
The good news is that many retirement planning apps allow you to factor in the amount you’ll need each month when setting your goals. Some will actively tell you whether you’re likely to hit your goals given how much you’re currently saving. It’s smart to make use of a retirement planning tool to ensure that you’ll have enough once you leave your career behind you.
Think about other assets
Some people might not have the full amount they hope to by the time they aim to retire. While, for many, this means continuing on in their jobs, there are also options to look into to help fund your retirement so that you can leave your job when you want to.
For instance, reverse mortgage loans allow retirees to access their home equity as cash or a line of credit. This is especially useful for those who own a home but are low on savings – you can use a free reverse mortgage calculator online to find out whether one of these financial products suits your situation.
Other retirees have other kinds of assets that they can use to help fund their golden years. Many continue working in a part-time capacity, offering advisory and consulting services in the industries they retired from. Others turn a side-hobby, like woodworking or sewing, into a full-time career.
However you plan for retirement, the most important thing is to ensure that you have the assets and funding at your disposal that you’ll need. Far too many Americans face retirement without enough stashed away, leading to serious struggles once they leave their jobs. With the right plans and funding strategies, you can be ready to retire when you want to.