Most of us look forward to retirement. We long for the day when we can wake up because we are ready to wake up, instead of waking up because of an alarm. We are ready to relax and enjoy pursuing hobbies and special interests instead of chasing the clock. Even though we may be emotionally ready to retire, are we financially ready to retire? Can we truly afford to quit work?

Assessing Your Financial Readiness to Retire

Several signs can indicate you are not ready to retire financially. Three signs that you need to consider are:

1.  You owe a substantial amount of debt.

Many people retire with debt; therefore, the fact that you owe debt does not prevent you from retiring. However, if you owe a substantial amount of debt, the repayment of the debt could place a strain on your budget. Most individuals who retire lose some of their income each month. With less income each month, it may be difficult to repay your debt while continuing your current standard of living.

Your best option may be to continue to work to pay down your debt or pay off your debt before retirement. You may need to make some lifestyle changes now to stay on track to meet your retirement goals. A financial planner can assess your current financial situation, including your debt obligations, to help you restructure your budget and finances to eliminate as much debt as possible before you reach your target age for retirement.

2.  You do not have sufficient retirement savings.

The best way to know if you have sufficient retirement savings is to have a retirement plan. If you do not have a retirement plan, you are definitely not ready financially to retire. A retirement plan estimates the income you need each month during retirement to maintain the standard of living you desire. Retirement planning allows you to develop a strategy to address financial matters that often become issues during retirement, such as health care costs, long-term care, living on a fixed income, increases in the cost of living, covering monthly living expenses, and paying unexpected expenses.

Your retirement plan addresses your current level of retirement savings, goals for future savings, and the age you intend to apply for Social Security. Without a retirement plan, you have no way to know how much money you will need during retirement and whether you are saving enough now to meet your financial obligations after retirement. With a retirement plan, you can determine if you are behind on retirement saving and develop a strategy for catching up on retirement savings to keep yourself on track to quit work when you reach your target retirement age.

3.  You are struggling to make ends meet now.

If you are having trouble paying your monthly bills and living expenses right now, you will have a tough time doing so on a fixed income. Taking drastic measures to pay bills, such as borrowing against your home, using credit cards, or selling property is an indicator that your financial situation is not stable.

Ideally, you need financial stability before you retire to ensure you can support yourself without working. You may need to re-evaluate your current standard of living and budget to address financial problems so that you can get back on track for retirement.

Work with a Financial Planner to Develop a Retirement Plan That Works for You

Retirement planning can seem overwhelming. Understanding the various retirement accounts and options for saving for retirement is crucial. If you want to learn more about retirement planning and financial planning, contact our office to speak with a financial planner.

The Castle Wealth Group offers a variety of services that can help you improve your finances and plan for retirement. Our classes and individual counseling are designed to give you the tools, resources, and information you need to set realistic goals that you can reach.

Call (844) 885-4200 to request more information about our services.