The question of am I ready to retire or can I retire is one that must be answered by considering two important factors. The first to truly consider is am I mentally and emotionally ready to move on to the next phase of my life, leaving the job I've had for 30 to 40 years, and the second question is am I financially able to quit my job.
Am I Emotionally Ready To Retire?
You've had a routine of waking up every morning at the same time each day and spending many hours working for 5 or 6 day a week. The social interaction at work and your production of a product is sometimes very important to ones self-esteem. Not having that emotional stability when retired may take a toll on your self-worth if you need that in your life. If you are concerned about the previous statement and really want to retire anyway, you may consider getting a part-time job after you retire and working 10 to 20 hours a week. That way you fill that emotional gap that you need and also have plenty of time to enjoy the things that are important to you.
However, many of us dream of the day when we can retire and not be part of that stressful race to stay ahead and truly have no qualms about leaving that life behind. You can truly say its time to move on and start spending more time with the spouse, and enjoying life by doing hobbies or by giving of your new free time to help others with charity work. So if that describes you and feel it's time to start the next phase, then you are emotionally ready!
Am I Financially Ready To Retire?
Hopefully you have been diligent about maxing out your 401K or other pension plan at work and have some idea about where you stand financially for the future. The kids are grown and have their own lives, not depending on Mom and Dad, and now with just you and your spouse you have assessed your needs when retired. That being the case, you really need to consider doing a more rigorous assessment of where you are the first day you retire and then how your future plays out to your estimated end of life. The only way to do that is to consider all the factors involved which include the following:
- Cost of living increases for your pension/s
- Estimated Inflation Rate
- Estimated Savings Rate
- Social Security Benefits
- Daily Home Expenses today and in the future
- Future Large purchases (i.e. cars, vacations, etc.)
- Elderly Care
- Etc.
I recommend approaching this in two possible ways to ensure the security of you and your spouse for the rest of your lives.
1) You can choose to consult a financial advisor to provide an analysis of your specific situation. They will analyze your income versus time relative to your expenses versus time and tell you if any shortfalls exist. With that, you will have a very good idea whether you are financially ready to retire or not. If not, the financial professional should provide suggested scenarios for what needs to be done for that to happen. You will then have choices to make that can greatly impact your future and hopefully make your retirement the best phase of your life.
2) If you are a do-it-yourself type person and want to perform the analysis yourself, then there are some very good software packages on the market that will serve you very well. A good software will request input for all the important factors needed for an analysis that you can feel confidence in.
Warning: when doing your own analysis, you really have to be honest with yourself and input the information in a way that won't provide you with a non-conservative projection. You must not be too optimistic relative to rate of return on investments or inflation rate because it has a significant impact on the answer.
Hopefully this article will provide a little help with your decision of when to retire.
