How do you decide when to retire? Making that leap out of the workforce and into your retirement isn’t a decision that should be taken lightly or made for the wrong reasons. While a bad day at work or seeing someone else’s vacation photos on Facebook can give you trigger finger, it’s best to take a thorough approach to this major life transition.
Deciding when to retire involves careful consideration of various factors, including your financial readiness, emotional preparedness, and overall health. That doesn’t mean you can’t live your dream retirement sooner. Let’s look at a few signs that you’re ready to retire.
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You’ve Saved Enough
One of the first signs that you’re ready to retire is financial readiness. This means you have enough savings and investments to support your lifestyle without a regular paycheck.
Knowing how much is “enough” isn’t always simple. You’ll need to evaluate your savings, investments, and potential income sources. These may include Social Security benefits, pensions, annuities, and rental income.
You should also determine how you want to spend your retirement and how much it will cost to do the things you’re looking forward to. It’s important to factor in healthcare costs and have a plan for staying ahead of inflation.
If your projected retirement income can cover your estimated expenses for the duration of your retirement, you’re financially ready to retire.
- You Aren’t Dreading Retirement
Retirement is not just a financial transition, but also an emotional and psychological one. If you aren’t mentally prepared for the changes retirement brings, you may find this new season of life disappointing.
Boredom and loneliness are common contributors to dissatisfaction in retirement. Navigating these challenges requires a proactive approach to retirement planning. If you’re excited about retiring and have ideas on how to fill your days, you might be emotionally prepared for the next phase in your life. This could include travel plans, hobbies, volunteering, or spending more time investing in your relationships
Retirement doesn’t flip any magic switch. Start trying out hobbies and reconnecting with loved ones now so you aren’t starting from square one after retiring. Remember: there’s no rush. If you feel worried about quitting your job or don’t know how to spend your time after retiring, you may need additional time to prepare emotionally.
- Your Job Is Negatively Impacting Your Health
If your job is physically or mentally demanding and taking a toll on your health, it might be time to retire. After all, why work so hard to get to a retirement that you can’t enjoy due to poor health?
Mental or emotional stress and physical labor can both cause significant health concerns that may impact your ability to enjoy your retirement years as well as increase healthcare costs. If you’re financially able to retire, it might be time to do so.
If full retirement isn’t an option, consider moving to a consultation role, cutting your hours, or exploring a second career. Working after retirement can help you ease into a new rhythm of life while relieving the financial burden of being fully retired. Whatever you choose, remember that if your job is taking away from your health, it’s also taking away from your retirement.
- You No Longer Enjoy Working
Job satisfaction plays a significant role in retirement decisions. If you no longer find your work fulfilling or enjoyable, or if you dread heading into the office every morning, it might be time to consider retirement.
One of the common reasons why people stay in a job they dislike is the fear of running out of money in retirement. In fact, a recent study found that 64% of Americans are worried they don’t have enough to retire due to factors like inflation and Social Security depletion.
Instead of letting fear drive your retirement plans, consider getting a second set of eyes on your financial strategy. Working with a financial advisor can help you determine how much you need in order to retire with confidence. Once you have the facts and a plan, you don’t need to work a day longer than necessary.
- You Don’t Have Any Debt
If you’ve paid off your mortgage, credit card debts, and medical or student loans, you’re in a good position to retire. However, if you’re still struggling with debt, it might be wise to delay retirement. Entering retirement with financial burdens means you could be facing high-interest loans on a fixed income, not to mention the impact on your ability to enjoy your golden years. Variable-rate debt, like an Adjustable Rate Mortgage, can fluctuate with inflation, making it difficult to know how much of your retirement savings will be swallowed up by interest rates.
Instead of letting interest rates take over your retirement income, talk to your financial advisor about how to pay off your debt now so you can retire sooner with peace of mind.
- You’re Eligible for Social Security or Pension Benefits
The timing of your retirement affects how much money you’ll have to retire. Do you know when you can start claiming benefits from Social Security or your pension?
More importantly, just because you can receive benefits, should you?
If you’ve reached your full retirement age and can afford to wait, your Social Security benefits will increase annually until you reach age 70. However, if you need the income, you might need to start claiming earlier. Meeting the requirements to receive pension benefits also plays a role in knowing when to retire.
If you want to retire before your benefits kick in or take advantage of delaying benefits, consider alternative investments to supplement your retirement income, like annuities, bonds, or income from real estate investments.
- You’ve Already Started Living Like a Retiree
Retirement brings significant lifestyle changes, including fewer commitments, more time with your spouse, and a fixed income. If you’ve already started easing into these lifestyle shifts and know how to navigate them, it might be time to retire.
However, jumping “cold turkey” into retirement can be a rude awakening for many. Less time at work often means fewer social interactions unless you’ve invested in friendships elsewhere. Retirement can also bring up relational issues with your spouse that previously went unnoticed due to busy work schedules.
Remember, a fulfilling retirement involves more than just financial readiness. It’s also about being prepared for changes in your daily routine and social interactions. Gradually incorporating these changes before you retire can make your retirement years more rewarding.
- You Have a Clear Vision for Retirement
Retirement is deeply personal; what one person finds restful and rewarding may not feel the same to you. Finding fulfillment in retirement starts by outlining a specific plan for how you want the next chapter of your life to look.
Maybe you want to spend more time at a vacation home, babysitting the grandkids regularly, or taking up a new hobby. Have you thought about how much time that will take, and how much free time you’ll still have? No matter how much you love fishing, you probably won’t spend 40 hours a week on it. Taking time to make realistic plans is crucial when thinking about retiring. If your vision board or bucket list is overflowing, it’s a good indicator that you’re ready to jump into a successful retirement.
- The Market and Your Portfolio are Healthy
Market conditions can influence the longevity of your retirement savings, thanks to the sequence of returns. An economic downturn during the first few years of your retirement will mean you need to sell more shares than anticipated to yield sufficient retirement income. The more shares you sell, the less your remaining investments are able to compound, making a significant dent in your total retirement savings.
Similarly, it’s important to make sure your investment strategy is well-balanced. A lopsided portfolio, due to employer stock options or a neglected financial strategy, can make your investments vulnerable to market fluctuations.
Diversifying your investment strategy is a good way to make sure you can retire when you want to without incurring unnecessary financial risks. If you’re not sure if your investments are well-positioned, or if you’re worried about the timing of your retirement, a financial advisor can help.
- You’ve Asked the Right Questions
When planning for retirement, one of the most important questions to ask is “If ____ happens, will I still be okay?”
There’s no simple way to know if you’re ready to retire. That’s why working with a trusted financial advisor is helpful. They can provide valuable insights into your retirement readiness, like helping you identify and plan for taxes, adjust your strategy and withdrawals as needed, and navigate bumps in the road.
Most importantly, your financial advisor should understand your specific financial situation and goals. You don’t want just any retirement strategy; you want one that works for you. Having a professional by your side can make this significant life transition smoother and more manageable.
Ready to Roll
At Caviness Wealth Management, we want to make sure nothing is holding you back from the retirement of your dreams. If one or more of these indicators sounds like you, it might be time to start transitioning into retirement. And if you’re still not sure whether now is the right time for you to retire, get started by booking a free call with me here.
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Content in this material is for general information only and not intended to provide specific advice or recommendations for any individual. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and may not be invested into directly.
Securities offered through LPL Financial, Member FINRA/SIPC. Investment advice offered through Caviness Wealth Management, LLC, a Registered Investment Advisor and separate entity from LPL Financial.
