5 Signs You’re Financially Ready to Retire

You’ve done a stellar job of managing your 401(k) account throughout the years. Now, you’re approaching retirement. You may be asking yourself, do I have enough saved for retirement? How will I know when I’m financially ready to retire? Here are a few tips to help bring you peace of mind.

1. You know your full retirement age:

In 1983, Congress passed a law that increased the retirement age of 65 based on the year you were born. Your full retirement age is when you can start receiving full Social Security benefits. If you choose to retire early, you can start to receive reduced social security benefits at age 62. However, if you wait until your full retirement age you will receive your full benefits.

Depending on your birth year, your full retirement age will vary. If your birth year falls between 1943 and 1954, your full retirement age is 66. Those born between 1955 and 1959 are subject to increases illustrated in the following chart:

Finally, retirement plan participants born in 1960 or later have a full retirement age of 67.

If you decide to delay taking your full retirement benefits until you reach the age of 70, your benefit amount will increase each year you delay receiving Social Security benefits.  

2. You’re financially stable:

When considering retirement, you don’t want to worry about spending all of your money in the absence of a consistent paycheck. You may want to assess certain aspects of your life to determine if you have financial stability. Knowing the answer to a few of these questions might be a great start to your planning process.

• Can you afford healthcare? This can be a major concern for most individuals considering retirement. Unless they receive health coverage through a spouse, many retirees no longer have access to their employer-sponsored health insurance. In fact, some employees hold off on retirement because they don’t meet the age requirement to qualify for Medicare, which is 65 or older.
• How much debt do you have? Debt that you’ve accumulated at the time of retirement can add additional stress to your decision-making process. Your financial advisor may recommend that you concentrate on paying down debt, supporting you in making a debt repayment plan.
• Do you depend on Social Security? If you receive Social Security, this can certainly add to your income, butit’s often not enough to be your sole source of income. When considering retirement, crunch the numbers to ensure that you’ll have enough money in your account for all your essentials; you can possibly set aside the additional income you receive from Social Security for a rainy day or entertainment purposes.

3. You’ve saved enough for comfort:

To achieve this financial stability, we suggest working with a financial advisor to determine how much of your income you should and can afford to save and spend.

If you need additional help determining the dollar amount you’ll need to retire comfortably, you may consider logging in to your ePlan Services account and giving our convenient Retirement Outlook Calculator a try.

4. You’ve budgeted:

Before you retire, you’ll need to keep track of your monthly expenses, so you’ll know how much money you’ll need each month for your necessities. Consider expenses such as electricity, gas, internet, etc. You may even decide to save some of your money for vacations.

Knowing what you spend each month, plus where you’ll need to cut back, can go a long way toward making you feel confident in your retirement decision. It can also help you determine how much monthly and annual income you’ll need. After you’ve done the math and determined your monthly financial needs, you’ll be one step closer to retirement preparedness.

5. You have a withdrawal strategy:

If you withdraw your funds from a pre-tax account, you’ll pay taxes on the withdrawals. However, if you’re withdrawing money from a Roth account, your qualified withdrawals will be tax-free.

If you’re interested in exploring ways to minimize the amount of taxes you may have to pay on withdrawals from a traditional retirement account, perhaps working with a financial adviser would be beneficial.

Conclusion

Transitioning from the workforce into retirement doesn’t have to be a frightening experience. If you approach retirement with a smart plan of action, you stand a promising chance at a smooth journey ahead.