Are you ready to retire? The stark reality is that if you are asking yourself that question now, then your retirement readiness status may be a 50/50 proposition at best.
You should know whether you are ready to retire now or in the near future. Retirement planning is something that should begin long before the act of retirement.
It’s not the end of the world if your retirement planning is beginning now if you are in middle age, but you have a long way to go.
And if you are unsure if you can retire, you are not alone.
Around 44% of Americans between the age of 40 and 79 have withdrawn money from their retirement plans earlier than expected. More than 33% of Americans have no money saved for retirement and not engaged in any retirement planning.
And while 77% of Americans are planning and saving for their retirement, many haven’t saved enough money. Most Americans aged between 55 and 64 barely have $107,000 saved for retirement.
Are you ready for retirement? Take this quiz and find out.
Do you know your retirement number?
What is your retirement number? If it is only $107,000 then you are not ready for retirement.
Your retirement number is the amount of money you need to spend each month and year to live out your retirement comfortably. So, you must know how much money to withdraw from your retirement account annually to pay your bills and expenses.
You need a living wage of $45,000 to live comfortably in most American cities. So, a $107,000 retirement balance wouldn’t last three years.
Two retirees living in New York City need an annual retirement number of $58,000. And they would need $134,000 if they were supporting adult children or grandchildren.
The point is that if you don’t know your retirement number, which is a custom number, you aren’t ready. And forget the generalized $1 million nest egg number. With inflation and the rising cost of living numbers, it’s more like $3 million.
Do you have life insurance?
A modest term life or whole life policy activated a decade or two before retirement can be leveraged numerous ways financially during retirement.
For example, each spouse can list the other as a beneficiary or the accrued value of the policy can be converted into supplemental income.
When will you activate Social Security benefits?
Social Security benefits increase incrementally every month you wait to receive them. You must be 62 to receive them, but if you wait until age 70, your benefits package will increase.
That is, if you wait until you’re 70, you will have an added financial buffer for when you’re much older.
Do you have a health care fund?
A retired couple may need $400,000 to cover medical expenses in retirement. And most retirement plans don’t include health care costs.
Consider starting a tax beneficial health savings account to supplement Medicare coverage. Think about your potential health expenses now so you aren’t shocked with emergency bills later.