10 Signs You're Not Ready to Retire
If any sound familiar, you may want to rethink your plans
(This article previously appeared on GoBankingRates.com.)
For a long time, you might have been asking yourself, “When can I retire?” But now, retirement is almost here, and you find yourself wondering, “Am I really ready to retire?”
A lot of people underestimate what they need to do financially, mentally and emotionally to prepare for retirement. But that doesn’t have to be your story. Make sure you’re prepared, so you can enjoy your retirement.
Here are 10 signs that suggest you might not be ready to retire and need to rethink your retirement strategy plan
1. You Haven’t Outlined a Financial Plan
A successful retirement requires a well thought-out plan, but thorough retirement planning is something many people haven’t done.
Financial professionals, including Michael Foguth of Foguth Financial Group, see it all the time. “I have people who will come in, and when I ask them how much income they need every month to live on, they just look at me with a blank stare,” he said.
You can’t expect to retire comfortably until you’ve determined your costs. You should start with your needs, like food, electricity and mortgage and then factor in the costs for your wants. Once you’ve done that, you need to determine your retirement income. A lot of people plan to retire without estimating their Social Security payments, pension or other sources of income.
2. You’re Struggling Now
In one survey, almost a quarter of boomers admitted they had difficulty paying their rent or mortgage within the past 12 months. But all too often, people who are already struggling are determined to retire. They feel like they can find a way to get by. Once they’re out of work, in many cases, things get worse, however. According to the National Council of Aging, one-third of senior households don’t have any money left after paying their expenses.
If you’re currently struggling to cover your living expenses, this is not the time to retire and try to live on less income. “You should probably re-examine your budget and identify areas to cut down to save more for your retirement,” said Katie Ross, manager of education and development for American Consumer Credit Counseling.
And don’t place your faith in schemes that you think will allow you to retire now but come up with the money later. “If it looks like you have to take drastic measures, such as selling your property or getting a reverse mortgage, then it’s time to reconsider your retirement,” said Ross. “Make changes to your savings strategy or your career now so that your retirement will be comfortable.”
3. You Still Have a Lot of Debt
Many people don’t even know how much they owe. All they know is their bills are at a comfortable level and they assume they can continue to pay them even once they stop working. But you need to take some time to thoroughly look at, and understand, how much money you owe overall so you can become debt-free in retirement.
If you have a lot of debts, you should keep working until you whittle them down. Credit card balances, auto loans, hefty mortgages and other monthly obligations aren’t headaches you want to drag into retirement with you. Those expenses are definitely going to put a strain on your funds, said Ross — especially if you’re living on a fixed income. And, debt reduces your ability to handle financial shocks and deal with inflation.
4. You Need to Work, But Haven’t Found a Part-Time Job
According to the Federal Reserve, about 12 percent of people plan to retire and then find a different part-time job while roughly 3 percent plan to find a full-time job after retiring. But if you haven’t lined up another job, you might want to stick with your current employer a little longer.
Don’t assume that because of your years of experience and stellar references companies will jump at the opportunity to bring you on board.
5. You Haven’t Reassessed Your Portfolio
Your portfolio will become a crucial part of your financial well-being when you’re retired, and reassessing it is an important part of retirement planning.
“It’s not uncommon for me to sit down with clients, in their early-to-mid-60s, who have never adjusted their portfolio to reduce risk as they approach retirement, and this can be extremely risky,” said Kevin Schwarz, a financial advisor at Concord Wealth Management.
A lot of people have portfolios that have taken a major hit along the way. But since they’ve taken a passive approach to investing, they don’t know until they’re ready to retire — or worse, after they’ve retired. Then, they want to liquidate some assets.
Before you retire, you need to know how much you have and your options for accessing it. And the closer you get to retirement, the more you need to shift your investing strategy toward income-producing assets and wealth protection.
6. You Haven’t Decided What You’ll Do With Your Time
If your only friends are people you work with or all your friends are still working elsewhere, you need to decide what you’re going to do with your time.
Lonely retirees are common, and that sometimes leads to depression. “It’s important to develop social networks before taking the plunge,” said Julia Chung, the Certified Financial Planner behind JYC Financial.
People think they have a lot of interests and hobbies until they’re confronted with a future full of free time. When you’re retired, every day is like a Saturday. And if you get bored and don’t have enough hobbies, you’re at risk of overspending, said Schwarz.
7. Work Is Still Important to You
If you’re currently aiming for promotions and raises, you shouldn’t rush into retirement. Stay in your field as long as you feel motivated and driven to achieve. Retiring before you reach your professional goals can result in regret. Besides, “the resulting pay hikes and other earnings can also be a good way to build up some extra savings,” said Ross.
8. You Haven’t Thought About Your Retirement Identity
Right now, you might be a business owner or you might have a lot of authority at your current job. But who will you be when you retire?
Another question: People might need you and value your contributions now, but where will you get your sense of purpose and fulfillment when you stop working? The fact is, a person’s position in the world generally changes once they stop working.
“Emotional preparedness is key,” said Chung. “If the ‘Who am I?’ question is readily answered by a description of the work you do, you may not be ready to retire. Identity is a huge part of retirement readiness, and many people suffer depression after retirement because they haven’t adjusted their sense of self to fit a retired version.”
9. You’re Caring for Children or Elderly Parents
A lot of people who want to retire are either responsible for their elderly parents or they’re still caring for a child. And according to the Pew Research Center, 15 percent of people age 40 to 59 are “sandwiched” and providing care to both children and parents. You cannot realistically ignore those demands when you plan for retirement.
And in many cases, it’s best to continue working longer than planned until you have fewer obligations.
Caring for aging parents and children can deplete your nest egg faster than you think, said Schwarz. “These costs are variable as well,” he added. “On average, education costs are increasing at about 3 percent per year, and nursing home care is increasing around 4 percent. If you haven’t set aside the appropriate assets to cover these expenses, you may come up short in retirement.”
10. You’re Not on the Same Page With Your Spouse
Retirement is a major life change, and it’s a household decision. Too many people think solely about themselves and their retirement plans. But when you plan to retire, you need to be on the same page with your spouse.
Your spouse might not plan to retire for many years, and being retired alone might not be as fulfilling as you expect. Also, the reduction in income could also cause financial problems and place more strain on your partner than you realize.
“Your spouse might not be ready to retire with you or might still need your income to pay for current expenses,” said Schwarz. Without it, your household debt might rise, or your spouse might have to work longer than intended.