Travis Hawley:

Have you had one of those days at work where you just want to be done working and you’re ready to take that leap into retirement? Well, before you make that giant leap, you need to see if you’re ready for it. Today, we’re going to cover eight key indicators on when you might be able to retire.

Let’s face it, retirement is a completely new way of life, and you need to make sure that you’re prepared for it. Today, as we go through these eight key indicators, let’s see how many that you identify with.

Sign #1, you’ve created a budget that reflects your retirement goals and dreams. Look, just because you’re going into retirement, the goal is that your standard of living doesn’t have to change, just because you’re not bringing a paycheck in anymore. Now, if you’ve created that budget, you need to have an idea of what the target date and where your money is going each month. There’s a famous quote by Peter Drucker that says, “What doesn’t get measured, doesn’t get managed.” And if you don’t have a target in mind, as far as what your bills are, how much spending you’re going to be doing, then if you’re looking to build a retirement plan or work with a professional, there’s no way that we can know what you need per month. So, getting a budget in order if you haven’t done so already, to see exactly where your finances are going each month, is step number one.

Now, if you are building that budget, you need to break your expenses into two different things. You need to break it into need spending and want spending. The need spending is pretty self-explanatory. That’s paying for your mortgage, utility bills, food. All the necessary things to make sure that you’re able to live. And then, the want spending is, “Hey, how many trips am I going to take this year? Do I like to go out to dinner? Do I like to go to the movies?” All of those things cost money, and in a world where inflation is growing, we need to have an idea of what that might look like.

Now, one thing to understand as well, that a lot of people don’t take into account is that, when you get to retirement, every day is Saturday. And statistically speaking, most people spend the most money on Saturday. So, have an idea of what you want your retirement life to look like, whether it’s just you, or you and your spouse, so you have a target in mind to make sure that you have enough money coming in to live the life that you want.

Sign #2, you have a very clear understanding of the income that is needed for retirement. Now, first thing you want to do is total up all the assets that you have. Now, we’re talking about your 401(k)s, your 403(b)s, stock accounts, things like that. But understand that even though you have those vehicles to be able to help support your retirement, those aren’t necessarily guaranteed forms of income for the rest of your life. The things that you need to take into consideration are social security. When is the best time for you to be able to turn that on, so you’re maximizing your benefits? Number two is pensions. Pensions are pretty rare these days. Unless you’re a government worker, a teacher, or something along those lines, companies aren’t offering pensions very much anymore.

The next thing that you might have, you might have rental properties that are bringing in good income for you. These are all very solid avenues to be able to produce monthly income for you. We talked about having the lump sum in your 401(k)s. You can generate income out of those, but you want to have as many guaranteed forms of income as you possibly can when you’re building your retirement plan.

So, we’ve covered, so far, what your expenses are and the income sources that will take care of those expenses. Another thing that you need to account for is, what expenses you might have in the future? Because things are always changing in our world. We talked about inflation, how dollars today may not buy goods in the future at the same price. So, have a clear understanding of how much money you need coming in, to cover what you need to be able to live.

Sign #3, you are out of debt. Hey, if you’ve paid off all your debt, congratulations. That is a huge accomplishment in preparing for retirement. Now, before you make that leap into retirement, you need to make sure that you are on the right side of zero. And there’s good debt and there’s bad debt. What we consider good debt, I would consider your mortgage a debt that is necessary to have. If you are able to pay your house off before you get into retirement or early on in your retirement, we have seen that most people are a lot more content and have a lot less stress, just because they’ve gotten one of those major expenses that are no longer part of their budget sheet each month.

Let’s talk about credit card debt or other forms, whether it be student loans and things like that. If you are considering retiring, especially with the credit card debt, that is something that you need to make sure, and I would advise that you take care of that before you stop working. Because the reality of it is, if you have X amount of dollars in credit card debt and you decide to get into retirement, that’s going to be the first thing that we are going to look to address. And in our day and age, credit is pretty much built into our mindset and built into our way of life. And a lot of people have a lot of projects that they want to do when they get to retirement.

I’d say, probably 75% of the people that I meet with, say, “Well, we want to remodel the house. We want to do a backyard. We think it’s going to be about 50 to $75,000 to do a whole remodel.” Well, something to consider, it may be better for you to be able to do that while you’re still working and have a paycheck coming in, rather than getting to that retirement date, swiping the credit card, and having to dig yourself out of a hole on a pretty large expense that can cost an awful lot.

Sign #4, you’re no longer supporting your dependents. Look, if you have any dependents that you have to support, and that could be your children getting through college that just might be done, it could be aging parents that need help with long-term care and things like that, that may be a reason why you may want to work a little bit longer.

Sign #5, you have an adequate emergency fund. A lot of people are unclear what an emergency fund is. An emergency fund is exactly what it sounds like. It is there for emergencies. Now, most people, when they’re building an emergency fund, there can become a point where you have too much in your emergency fund, and most of the time that’s something along like the savings account, checking account, where it’s not going to be looking to get a lot of interest. But in most cases, most people try to have three to six months’ worth of expenses in a safe, protected bucket in the bank, so that way, if something happens, like you need to fix a roof, fix an air conditioner, or you need a new car, which does happen because life is always unexpected, you want to make sure that you have enough funds that you can pull from, in case of those emergencies, so that way you’re not draining down your retirement accounts.

Sign #6, you have a plan for healthcare coverage. Look, healthcare costs are rising, and Medicare doesn’t cover everything, especially the things that you might actually really need, like your teeth or your feet or things like that. But if you’re looking at being able to retire, and if it’s before 65 when you’re eligible for Medicare, you need to consider that that may boost up your expenses each month, because private insurance is not cheap. And if you have certain doctors that you work with and you want to stay with them, you need to take into account how much extra it might cost you when you’re no longer on your company benefits.

So, to summarize sign #6, if you’re retiring at 65 or older, you need to make sure that you’re optimizing your Medicare plan. If you’re retiring pre-65, you need to make sure that you have an adequate healthcare plan in place, to make sure that you’re able to cover your medical costs.

Sign #7, your portfolio is updated and diversified. Look, you’ve been working for 30 to 40 years at this point, and in that entire time, you’ve been working on growing your assets to prepare for retirement. Well, now that you’re going into retirement, you’re no longer in growth mode. In fact, you are in preservation mode, and you need to figure out and look at your overall portfolio to see if you’ve addressed these three indicators. Number one, the size of your overall portfolio and the amount of assets that you have when you decide to leave your employer. Number two, the expected growth rate of your portfolio. And what we’re looking at here is the average annual return that you’re looking to get from your investments. Number three, the amount of annual withdrawal rate that you need to be able to sustain your lifestyle in retirement.

In talking about your annual withdrawal rate, a lot of people, when they get into retirement, they’re very nervous or scared of the market, and they think that the solution is putting all their money into a CD or a bank savings account. But here’s the problem with that. You’re not going to get that annual return rate to be able to keep place with inflation and what you’re drawing out of your investments.

Sign #8, you are retiring to something not from something. We want to make sure that you’ve given this some thought, to make sure that you’re able to have a very fulfilling retirement life. Another word of advice as well, if you are someone that is married, I encourage you both to sit down and have a in-depth conversation on what you want your retirement to look like individually and together. Because understand, you’ve both been going to work for 40 years, and now when you’re both in retirement, you’re stuck with each other at home all day. And a lot of times, people have two different ideas of what they want their retirement to look like. So, think it through, have some conversations, and have an idea of how you want to spend your time when you get there.

How many of the different signs do you identify with? And are you ready for retirement? Let me know your thoughts in the comments below.

If you’re feeling like you’re not quite ready for retirement, there’s several things that you can do immediately. Number one, create a budget. Number two, work on paying down your debt. Number three, build an emergency fund. Number four, maximize your retirement accounts. And number five, create a retirement plan, one that incorporates income, your investments, inflation, taxes, healthcare, and legacy.

Look, we’re all waiting for that aha moment when we are able to retire, and retirement should be a time of relaxation and happiness, and not a time to be financially stressed. There’s a myriad of issues that may be standing in your way in preparing for retirement. It may be, what type of investments you’re in? It could be, what income sources you need? Taxes are a big thing. Inflation is a key topic that we have to talk about, and make sure that your plan involves that to account for it.

Now, if you are someone that doesn’t have a good base of knowledge when it comes to retirement planning, there’s actually a word out there to describe you. Normal. You are normal. But if you are curious of what your retirement might look like or when you’re able to do it, I recommend seeking out some professional help from an advisor, because they’re going to be able to identify with you what stands in your way, or you very well may find out that you are actually ready for retirement, and now it’s up to you when you’re ready to take that leap.

If you’re curious to see how we help our clients plan for retirement, check out our website at www.mosleywealthmanagement.com. And if you found this information helpful, feel free to like, subscribe our channel for more retirement tips. Until next week. I’m Travis Hawley.