Are You Ready to Retire?
June 19, 2009 by Mr. GoTo
Filed under Retirement Planning
Will this become the ultimate question for baby boomers: Am I ready for retirement? Most baby boomers would likely have a negative answer to this question in 2009. But that won’t prevent us from asking it, at least to ourselves, as economic conditions change.
I think that the “ready to retire” question actually has multiple parts. See if you agree.
What is Your Definition of Retirement?
For some, retirement means leaving the workforce entirely, transitioning to a life of complete leisure. For others (including me), retirement is actually a state of financial independence. You can work if you want to, but you don’t need the money.
A related part of this question is what do you intend to do in retirement? If you are not going to work for a paycheck like you do now, what activities will you replace that working time with? If you can’t come up with anything, you probably are not ready to pull the trigger on retirement. Even if you have some things in mind, it would be a good idea to test them out ahead of time.
Where Will You Live When You Retire?
This is another critical sub-part to the “Am I ready to retire” question. Do you plan on aging in place? Will you stay in the same community but downsize? Will you move to a vacation home that you have already purchased? Will you relocate based on cost of living or family proximity? Are you dreaming of waterfront living?
Maybe you have thought about lowering your cost of living by retiring in a foreign country. If so, have you completed your due diligence?
I believe that all of this needs to be part of your thinking and planning before you can conclude that you are ready for retirement.
Are You at an Optimum Retirement Age?
This question includes factors such as your physical and mental health status. In other words, are you physically or mentally just burned out with your working life?
Another important age-related factor is becoming eligible for Medicare and Social Security retirement benefits. These eligibility ages may be changing for the younger boomers.
Finally, the optimal age determination triggers a related inquiry for you: What is your life expectancy beyond your retirement age? Your vision for retirement and your income planning are definitely affected by the longevity reality as well. There is a bit of retirement date goal setting behavior involved here also.
Do You Have Adequate Retirement Income Arranged?
Most boomers would probably put this question at the top of the list. I have put it at the end of the list intentionally. Too often the financial issue dominates the discussion of retirement readiness, to the exclusion of the other important questions.
This question actually has more than part all by itself. One part is understanding and accurately predicting what your expenses will be in retirement. That is what I call the “demand” side of the retirement income equation and is a topic for another day. It is more complicated than you might think. If you disagree, I challenge you to pretend for 6 months that you are retired on a fixed income. See if you can scale your life back accordingly. Be sure to factor in those inevitable major expenses such as a new car or new roof.
The other part of the equation is the “supply” side, i.e., your retirement income sources. Your money supply must equal or exceed your demand. And, you must have a plan for making that retirement income last. Otherwise, you may experience the phenomenon (increasingly popular) of “unretirement.”
For a quick check of how much monthly income your savings might provide in retirement after taxes and inflation, try this retirement income calculator.
Final Thoughts on Retirement Readiness
Admit it: We love to think about the next phase of our lives. Thinking about and being ready for that phase are two entirely different issues. Some baby boomers are on the threshold, ready to take the leap. Are they ready? Are you ready?
FREE UPDATES: If you enjoy what you read here, please consider subscribing to receive free updates automatically by RSS feed or by email. (I promise that your email address will not be shared or used for any other purpose.)
My Related Posts:
