9 Signs You Are Not Financially OK to Retire
Amy Fontinelle has more than 15 years of experience covering personal finance—insurance, home ownership, retirement planning, financial aid, budgeting, and credit cards—as well corporate finance and accounting, economics, and investing. In addition to Investopedia, she has written for Forbes Advisor, The Motley Fool, Credible, and Insider and is the managing editor of an economics journal. She is a graduate of Washington University in St. Louis.
Andy Smith is a Certified Financial Planner (CFP®), licensed realtor and educator with over 35 years of diverse financial management experience. He is an expert on personal finance, corporate finance and real estate and has assisted thousands of clients in meeting their financial goals over his career.
Kirsten Rohrs Schmitt is an accomplished professional editor, writer, proofreader, and fact-checker. She has expertise in finance, investing, real estate, and world history. Throughout her career, she has written and edited content for numerous consumer magazines and websites, crafted resumes and social media content for business owners, and created collateral for academia and nonprofits. Kirsten is also the founder and director of Your Best Edit; find her on LinkedIn and Facebook.
Being ready to retire means more than being ready to stop waking up at 6:00 a.m. to put in long hours at a job you’re not thrilled about. If it were that simple, most of us would retire at 25. What it really takes to retire is a solid grasp of your budget, a carefully considered investment and spending plan for your life savings, debt that’s under control, and a plan you’re excited about for how you’ll spend your days. With that in mind, here are 10 signs you might not be ready to retire yet.
Make a list
Writing down your aims may help you focus on what you really want to achieve – like a ‘to do’ list. Work out what you can afford to do and schedule time to make it happen, so you experience a sense of accomplishment, as you would have done at work.
Prevention is better than cure, and now is the perfect time to get your free midlife MOT. The NHS Health Check programme aims to help prevent heart disease, stroke, diabetes, kidney disease and certain types of dementia.
Everyone between the ages of 40 and 74, who has not already been diagnosed with one of these conditions or have certain risk factors, will be invited once every five years to have a check to assess their risk of these age-related illnesses and will be given support and advice to help them reduce or manage that risk.
Always dreamt of going on an around-the-world cruise, a wine-tasting trip through Italy, or a simple camping expedition in the Welsh valleys? Now you can finally make those long-held plans a reality, depending on your health and budget limitations.
Could you house a rescue cat or dog in need of a new home? Research has shown that our furry friends have a positive effect on our health and wellbeing.
According to pet researcher Allen R. McConnell, a professor of psychology at Miami University, people with pets are generally happier, more trusting, and less lonely than those who don’t have pets. They also visit the doctor less often for minor problems.
To find out more about rehoming a pet, visit your local animal rescue centre, the RSPCA or Dogs Trust. If you might be interested in volunteering to walk or foster an elderly person’s dog, contact The Cinnamon Trust.
Housing expenses don’t retire when you do
Retiring without a mortgage is a common goal for would-be retirees, but it’s a goal that many fail to meet. According to an American Financing survey, 44 percent of retired homeowners between ages 60 and 70 still carry a mortgage.
Even if you have paid off your mortgage, other expenses don’t go away. “Home maintenance and increasing property taxes can take up a large chunk of your budget,” says Dorsey, the California financial planner. New Jersey, Illinois and New Hampshire have the highest property tax rates, according to Rocket Mortgage; Hawaii, Alabama and Colorado have the lowest. As a rule of thumb, homeowners should set aside 1 percent of a home’s purchase price annually to cover repairs and replacement. That’s $3,500 per year on a $350,000 house. Don’t forget that many states offer lower property tax rates for those 65 and older.
Extra income can be hard to come by
Working in retirement might not be as simple as you think. While 74 percent of workers plan to work for pay in retirement, according to the EBRI study, just 27 percent of actual retirees reported working for pay. Even part-time work can be a challenge. “One thing early retirees don’t seem to realize is that if they are planning on doing traditional part-time work while retired, those jobs require a commitment to a schedule that sometimes is not very flexible,” says Leslie Beck, a certified financial planner in Rutherford, New Jersey. “This can cut into other retirement goals such as travel or visiting with family. I have had retirees surprised by the inflexibility of part-time work.”
If you figure you’ll instead fill the income void with Social Security, remember the earliest you can usually claim retirement benefits is age 62. Even then, you’ll only receive partial benefits. For anyone born in 1960 or later, the full retirement age, when you are entitled to 100 percent of your monthly benefit, is 67. By claiming early at 62, the benefit amount is reduced by 30 percent.