Twelve Signs That You Are Ready to Retire

 Many older adults retire at the end of December to “start fresh” financially in a new calendar (and tax) year. Many younger adults wonder when they will be ready to retire and how they will know. Below is a brief discussion (in no particular order) of 12 signs of retirement readiness:

Financial Preparedness- This includes adequate savings and other income sources (e.g., Social Security, pension, rent) as indicated by online tools like the FINRA Retirement Calculator.

 

Financial Independence- Multiple income sources that provide the ability to support your desired lifestyle without a paycheck from an employer.

 

Retirement Savings Accounts- Money saved, preferably for decades, in tax-deferred employer retirement accounts; e.g., 401(k), 403(b), and 457 plans and the thrift savings plan (TSP).

 

No or Low Debt- Major debts are paid off or have low balances including mortgages, home equity loans, car loans, student loans, and outstanding credit card balances.

 

Adequate Emergency Savings- At least three to six months of essential living expenses are set aside for emergencies (e.g., car repairs, new appliances, vet bills).

 

Health Insurance Coverage- There is a solid health insurance plan in place including Original Medicare with a supplemental policy, Medicare Advantage, or an employer’s retiree coverage.

 

Social Security Knowledge- An understanding of Social Security benefits and how much will be left after subtracting Medicare premiums, including IRMAA for high-income retirees.

 

Clear Retirement Goals- A clear vision of how you want to spend your retirement years (e.g., travel, volunteerism, entrepreneurship, part-time work, sports/hobbies, family caregiving).

 

Mental Readiness- Emotionally prepared for the transition from a work-oriented lifestyle to a more leisurely lifestyle where work is optional and there is more unstructured time.

 

Identity Bridges- Established hobbies, interests, and activities from pre-retirement years that can carry over into later life to provide meaning, structure, and “a reason to get up in the morning.”

 

Family Considerations- Agreement with a spouse on the timing of your respective workplace exits, where you will live, and activities that will be pursued individually and together.

 

Work Satisfaction- A feeling of satisfaction with having achieved career goals and a desire to make work optional in the future or dissatisfaction with your current work environment and a desire to leave.

 

For additional information about retirement readiness and financial transitions that occur in later life, read my book, Flipping a Switch.