Most of us have to work.
This is how we put a roof over our heads, food on the table and care for other personal needs.
Nothing in life is free, and it takes income to do just about everything.
But although many people have jobs, you might be plotting your retirement as we speak.
According to CreditRepair.com, “Retirement kicks in for most people at around 65 years of age, when they cease working and live off of money saved up during their lifetime.” However, there’s no rule that says you have to wait until you’re much older to leave the workforce.
It doesn’t matter if you’re in your 40s, 50s or 60s, your circumstances might make it possible to retire now. Retirement planning is crucial, and the earlier you start saving your money, the sooner you can stop working and start living your life to the fullest.
Of course, you shouldn’t jump into retirement prematurely. The last thing you want to do is retire and then realize you can’t survive on your retirement income. Narrowing down the perfect time to retire can be challenging, but there are clues to discern when the time’s right.
1. You’ve Paid Off Your Debts
You don’t have to be debt-free to retire, but the less debt you owe, the easier it’d be to survive on less income. Depending on how much you’ve saved over the years, your retirement income might only be half, or a little more than half of your regular income.
When deciding whether to retire, take a close look at debts like your mortgage, credit cards and auto loans. You’ll want to pay off as much as you can, especially larger balances that eat at your cash.
2. You’re Ready to Follow Your Passions
After working 20 or 30 years in a particular field, you might be ready to spread your wings and follow your passions. Many people are stuck in jobs they don’t like. These jobs might pay the bills and provide an opportunity to grow a comfortable nest egg, but there’s no personal satisfaction.
Since we only live once, you owe it to yourself to be happy. So if you’re in a position where you can retire now, take advantage of this opportunity and use your free time to start your own business or follow your dreams.
3. You’re About to Lose Your Job
If your company is downsizing and you’re about to lose your job, early retirement might be more attractive than starting over at a new company.
Between a severance pay and retirement plan distributions, your monthly income might be more than enough.
Will You Be Financially Stable?
It takes more than a “desire” to retire. You need to count the cost and make sure you’ll be financially stable in retirement.
Take a look at your monthly expenses and calculate every single expense from auto insurance to buying food. Some people make the mistake of retiring too early. As a result, they’re forced to downsize or sell possessions in order to drum up extra cash or live within their means. You can avoid this scenario by having a clear understanding of your personal finances before retiring.
Speak with a financial adviser to get an idea of what you can expect from monthly retirement distributions based on how much you’ve contributed to your 401(k) or IRA over the course of your career.
Next, take into account income you’ll receive from Social Security benefits (if eligible), as well as funds in your savings accounts, certificate of deposits and money market accounts.
Based on your potential income and current monthly expenses, you can determine whether you’ll have enough income to survive financially.
If you plan to seek part-time work after retiring from a full-time job, estimate potential earnings based on the type of job. This income can supplement your retirement income providing an additional cash cushion.
There’s no way to know with certainty how your finances will fare in retirement. However, using a retirement planning guide to prepare early can ensure you save enough to maintain your lifestyle. Additionally, you can increase financial stability by spending your money wisely and avoiding new debt after retiring.
(Photo by Daniel Condurachi / CC BY)