It’s a goal that most workers dream about their entire adult lives. Retirement. The day you finally get to stop building your schedule and priorities around your work obligations and start living life on your terms.
If you’re in your late 50s or in your 60s, you may be wondering when will be the right time for you to hang it up and head into retirement. How do you know if you’re truly ready? What if you retire too early and find you don’t have the financial security you need? What if you wait too long and miss out on the best years of your retirement?
It may be difficult to know the exact, perfect time to retire. However, there are a few common signs you may be ready. Check out the list below. Do any of these items sound familiar? If so, it may be time for you to consider retirement.
You have taken your budget for a test drive
There may be no more important or useful financial tool in retirement than your budget. A budget helps you see where you’re spending your money and whether your spending exceeds your income. Without a budget, it’s difficult to know whether you’re on the right track financially.
If you haven’t developed a retirement budget, now is the time to do so. Also, you may want to try taking your budget for a test drive. Try living on your retirement budget for a few months. If you’re comfortable, then your budget may be accurate. However, if you find that you can’t live on your budget, you may need to do some more saving or adjust your retirement expectations.
You have a plan for health care
Think Medicare will cover all your health care costs in retirement? Think again. Medicare is a very helpful tool for retirees, and, depending on your coverage choices, it will cover a wide range of costs. However, Fidelity estimates that the average 65-year-old couple will still pay $245,000 in retirement on out-of-pocket medical expenses.
That figure doesn’t include long-term care costs, which could be thousands of dollars per month and may be required for years, depending on your ailment. The U.S. Department of Health and Human Services estimates that the average 65-year-old has a 70 percent chance of needing long-term care.
How will you face these expenses? A well-funded health savings account (HSA) could help you cover the out-of-pocket costs. Long-term care insurance might be an effective way to pay for extended care and assistance. If you have a plan to pay for these costs, retirement could be a good idea. If not, you may have more planning to do.
You have an accurate estimate of your income sources
It can be stressful to think about life with no paycheck. For decades, you’ve been able to rely upon the fact that your next check would come in the following week or month. After you retire, though, that consistent income will stop.
Take some time to estimate all of your possible income sources in retirement. Social Security will almost certainly play a role. The only question is when you file for benefits. Generally, the longer you wait to file, the greater your benefit will be.
You may also be fortunate enough to have a pension. Your company’s human resources department or pension benefit manager can help you estimate your payment. Finally, you will also likely need to withdraw funds from your savings and investments in retirement. Estimate a conservative withdrawal rate that helps you meet your needs but also gives your investments an opportunity to grow.
If you want certainty in retirement with regard to income, you may want to consider an annuity. You can use an annuity to convert a portion of your savings into an income stream that is guaranteed for life.
For example, single premium immediate annuities pay a guaranteed income stream that is based on your premium amount and your life expectancy. The income lasts for life no matter how long you live or how the financial markets perform, so you can be confident that you will always have retirement income.
Not sure if you’re ready to retire? Contact us at America’s Annuity. We’re happy to consult with you, analyze your needs and objectives, and help you determine when is the right time for you to retire. Let’s connect soon.