If you read all the surveys and studies, the answer to the question are you ready to retire is a very loud no!
The recently released Northwestern Mutual Longevity & Preparedness study reveals that Americans appear to be startlingly unprepared financially to live into their 70s, 80s and 90s. Of those surveyed, only 56% said they feel financially prepared to live to 75, 46% said they feel financially prepared to live to 85, and just 36% said they feel prepared to live to 95.
The findings were even worse for women, who on average live five years longer than men. Men, regardless of age, are significantly more likely than women to feel financially prepared to live to age 75 (65% vs. 48%), to 85 (55% vs. 37%), and when it comes to living to 95, (43% vs. 30%). The differences between men and women was also highlighted in a new survey from ING Direct and DailyWorth.com. Nearly eight in 10 women say they lack financial savvy (or they are still learning) about retirement planning. Nearly 30 percent have no idea what their main source of retirement income will be, 40 percent don’t even know what kind of retirement lifestyle they want.
All this begs the question, how do you know you’re ready to retire? There are some tell-tell signs that you’re just about good to go.
There’s a plan in place
You have a formal investment plan and have been actively saving to be ready for retirement. You have enough saved to cover the estimated lifestyle and health care expenses you know you will need in retirement. But you’ve gone the extra step by saving enough to give yourself a cushion for the unexpected.
Social Security can wait
In fact, your savings are such that you will be able to delay taxes. Minimum withdrawals from most retirement accounts don’t become required until age 70 ½. “If you can defer taxes for an extra decade, you can take advantage of more time to compound, tax deferred,” says Grant Cardone, author of If You’re Not First You’re Last. Social Security eligibility starts at 62, but your checks are reduced by 25-35 percent if you sign up at that age. For each year you delay signing up for Social Security between ages 62-70, your benefit will increase by 7 to 8 percent, says Cardone.
The math adds up
You have met with a financial professional to put together a retirement income plan that will allow you to convert your retirement savings into a steady stream of income. This is an important step, says Delia deLisser, director of women’s programs at ING U.S. Many people often need help figuring out how to translate their retirement savings into use for every day spending. Knowing how to safely tap, and when is critical.
You know where you’ll live
The mystery is over. You know where you want to live in retirement. You have determined if you will stay put, or that you will stay in the same town but buy something smaller, or move to another city where expenses are less. You have a good sense that your retirement dollars will lost longer where you’ve chosen to live.
Mindset moved to retirement
Psychologically, you are already gone. You don’t see how you will miss work. You aren’t wondering how you will spend your days. “Just as it’s important to have a financial plan in place for retirement, it is equally important to have a life plan in place for retirement,” says deLisser. Many people have been so busy juggling family, work and other obligations for years, they have no clue about what they would do with free time. That’s not your issue. In fact, you are already planning which classes you would like to take, what organizations you would like to volunteer for, where you like to travel and more.
What’s up do?
You won’t be afraid to ask that question. You are well aware that health care costs can be retirement killers. Recent health care cost estimates calculated by Fidelity Investments are that a 65 year-old couple retiring this year will need $240,000 for medical expenses throughout retirement, which is a 4 percent increase from last year’s $230,000 estimate. You’re not overly concerned because you have access to good health insurance, whether through Medicare or private insurance. While in life there are no guarantees of good health, you are doing your part. You watch what you eat and drink, exercise, get proper rest and keep your stress to a minimum.
Another plus, says Jennifer FitzPatrick, author of Your 24/7 Older Parent, is if you are without financially dependent children, grandchildren or parents. Without those financial obligations, you’ll have less pressure on your no-paycheck lifestyle because it can be tough to say no to family when they are in need.
If all this doesn’t match where you are, then no, it’s not quite your time.