Retirement is something that we can all look forward to – but knowing when to retire can be a cause for uncertainty.
There’s all sorts of contradictory advice available online, with banks advising you to work harder and save longer, and some personal finance influencers opposing the need for excessive retirement savings entirely.
If you just want to know whether you’re ready to retire based on your current personal circumstances, stay tuned.
This article will guide you through the considerations you should make when making this incredibly important decision.
1. Work Out Your Living Expenses
When you’re nearing retirement, you can start to look at how much money you need to get by, whether it’s for paying bills, healthcare prescriptions, or your weekly grocery shop. Be sure to keep your own preferred lifestyle in mind, too. There’s no point in cutting out all of the things you enjoy just for the sake of spending less, or you might end up leading a very miserable retirement.
Once you know your expenses, you can work out whether the money you’ve saved for retirement is enough to get you by.
2. Understand The Safe Withdrawal Rate
It’s impossible to predict how long you will live, which makes it hard to know how long you’ll need to stretch out your savings for. Most retirees stick to a safe withdrawal rate – i.e. the maximum rate you should withdraw from your account each year – of 4%. This means that you should take out any more than 4% of your total savings on a year-by-year basis.
If you stick to the 4% safe withdrawal rate, you’re more likely to not run out of money during your retirement.
3. Consider Part-Time Work
If you’re considering retiring now but you’re worried you can’t afford it, why not consider part-time work? Yes, you might assume that the whole point of retiring is to put your feet up – but, as many people find, sitting around doing nothing gets boring, fast.
There are plenty of enjoyable part-time jobs you could take on during your retirement, such as seasonal jobs in a theme park, library jobs, or gardening. Taking on a part-time job means you don’t have the stress or commitment of something full-time, and it’ll give you something to look forward to and a bit of extra income to tie you over.
4. Assess Your Debt
If you’re still paying off debt, experts highly recommend that you pay back what you owe entirely before you consider retiring. Debt can contribute to your expenses more than you might realize, especially if you have multiple loans to pay off.
There are plenty of methods you can use to pay your debts quickly if you’re keen to retire soon. Paying more than what you owe on a monthly basis will speed up the repayment process. If you can, cut down on your spending for the time being and focus on putting your free cash into your debts. Nerd Wallet has a helpful article on fast ways to pay off debt if you need a little more guidance.
Remember: don’t be afraid to reach out to an expert!
It isn’t always obvious when you should retire, even if you’ve hit retirement age. A financial advisor can assess your income, expenses, and retirement savings and help you to determine your next steps.
In the meantime, if you’re interested in doing some more research, check out the resources at the bottom of this article from Can I Retire Yet.
Please SHARE this with your friends and family.
