We all look forward to a comfortable and delightful retirement. Everyone wants to get to that time when they longer must suffer the daily commute, be stuck in the office from 8 to 5 or deal with bosses or colleagues we don’t like. But, before you decide to jump the gun, you must ask yourself this: Are you ready for your retirement?
Some of us would want to retire at the typical retirement age of 60 or 65. Some would like to achieve early retirement at 55, or even much earlier. Regardless of the desired age of retirement, how would you know if you’re ready to retire? Before you retire, do this.
Emergencies Happen. Be Prepared
Ideally, you'll have a healthy amount of retirement savings stashed away in retirement fund by the time you stop working. But aside from your nest egg, you should also have a fully loaded emergency fund in time for retirement with enough cash to cover a solid six months of living expenses.
Now, you may be thinking: "Why do I need emergency savings if I have money in a retirement account?" And here's the reason: The purpose of an emergency fund is to give you immediate access to cash to cover an unforeseen need. The money in your retirement fund by contrast, might be invested, and it therefore might take some time to liquidate those investments and get your hands on that money. Plus, if you cash out investments at the wrong time, you might take a hit if you're forced to sell at a loss.
That's why you'll still need an all-cash emergency fund in retirement. Though you still, conceivably, will have other sources of income, there's nothing more instantly accessible than your personal bank savings account.
Get rid of all Debts
A happy retiree is not tied down by any financial obligations. And a happy retirement is when you’re financially independent — away from all the financial obligations.
Aside from a home loan, you should have paid off all other debt obligations you have, including credit card debt, car loan, personal loan, and other forms of financial obligations. You won’t be able to enjoy retirement if you’re still straddled with debts and loans. Don’t get any additional loans, especially if you’re close to retirement age, and make active effort to clear off your current debts as you get closer to your retirement age.
List down all your debts and rank them based on the interest rates. The ones with the highest interest rate are the ones that also suck the most money out of you. So, terminate these high interest-bearing loans first. You can consider other banking products to help you clear off your debts sooner and save on interest, such as a debt consolidation loan.
If you're part of a two-some, retirement doesn't just affect you; it's a profound lifestyle change for your entire family. Before you take the leap, get on the same page as your spouse.
Will you both be retiring, or will your spouse work longer? If your spouse is planning to maintain a career, will you end up being responsible for more household tasks — and are you OK with that? These questions need to be answered.
You'll also have to think through how your decision will affect your family finances. Will retiring now reduce the monthly income you receive for the rest of your life — as well as any inheritance your spouse could receive if he or she were to outlive you.
If you have children, factor them into your considerations. Are they financially stable and independent? At a certain point, you must stop worrying about your kids and they, hopefully, will start worrying about you. In an ideal world, neither parent nor adult child should have to provide for the other financially—but life doesn’t always unfold as it should. If you’re still doling out cash to your kids, you might not want to quit working just yet.
Have a plan
A plan that includes both lifestyle issues and money issues. Too often the retirement plan focuses on the financial issues. Remember that retirement is about more than just money. You can have all the money in the world but if you don't know how to spend it or have good people around you or you don't have your health, what good is the money? Remember the point of money is to buy you a life and that retirement is about living the golden years.