Are You Financially Ready to Retire? 5 Questions to Consider

Written by , September 11, 2012

Are You Financially Ready to Retire 5 Questions to ConsiderEntering retirement used to be almost exclusively a matter of age. Chances are you had a defined benefit retirement plan through your employer, and once you reached a certain age you would retire and begin receiving those benefits. Even if you were just relying on Social Security to fund the majority of your retirement expenses, most retirees began receiving benefits at the standard retirement age.

Today the issue of being ready to retire is far less dependent on an individual’s age than it is how much they themselves have saved for their own retirement.

With the decline of employer-sponsored plans and the rise in IRAs and 401(k)s, you’ll need to ask yourself the following questions. Here’s some retirement planning advice on things to consider on whether you are financially ready to retire.

  • Where are you Going to Live? Countless numbers of retirees in prior generations would move from their homes in the Northeast or Midwest to the sunnier states of Florida, Arizona or California in order to escape the cold. These days, many are finding that they can make their retirement savings go further if they move to certain other states when they retire.
  • How’s Your Health? The largest single expense category for most retirees is ongoing health care. Despite the recent health-care reforms, costs for many types of health and medical services continue to increase, and there’s no telling how things might change after the upcoming election. If you are honest with yourself and can identify possible healthcare expenses you’ll be faced with in retirement, then you’ll be better able to plan accordingly.
  • Do You Have a Retirement Plan? It’s important to have a plan for how you’re going to save towards your retirement, and to start implementing that plan as soon as possible. It’s estimated that over one quarter of the workers in the U.S. have less than $1,000 in total savings – including their retirement funds. It may be a significant period of time before these individuals are ever financially ready to retire.
  • What Ongoing Financial Obligations do you Have? Unfortunately, not all individuals enter their retirement years with a clean financial slate of no debt. Rather, many enter their retirement still subject to a mortgage on their residence, cosigned obligations for their children’s education, and perhaps even still paying down student loans of their own. These are sometimes on top of the high levels of consumer debt (most notably, credit cards) that many people have when they enter retirement. Before you can decide for sure that you are financially ready to retire, you need to have a solid understanding of the debts and other financial obligations that will eat into your retirement savings.
  • Are You Flexible? If you’re flexible then you’re more likely to be financially ready to retire. This flexibility might include adjusting your lifestyle expectations, as well as whether you continue to work part-time during your retirement years.
  • While the uncertainty of retirement can be a bit intimidating, answering the questions above can help you prepare yourself for your golden years.

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