9 Signs You’re Ready for Retirement

It’s common for workers to ask themselves, “Am I ready to retire?” For most, an enjoyable retirement is the reward for years of dedicated saving and investing. In decades past, most employees would work until they received a gold watch and a pension at age 65 — but those days are long gone.

While Social Security provides an average monthly benefit of $1,657 to retirees, that’s usually not sufficient to rely on as a nest egg. Most workers these days understand that they’ll likely have to supplement their Social Security benefits with their own investments via IRAs, 401(k) plans or other forms of saving.

With that said, here are some of the signs that you may very well be ready for retirement.

Probably the single most important factor in deciding whether or not you’re ready for retirement is the status of your savings and investments. Most pre-retirees have a specific number in mind that they would like to have when they retire, and if you’ve hit that, it may be time to hang up your work clothes.

You should also have a significant amount in a liquid emergency fund. Remember that your savings and investments may very well have to last you 25 years or more in retirement, and that inflation will play a role in eating away the value of your portfolio, so your “number” may be higher than you imagine.

Consumer debt is a financial killer no matter when you hold it. Every dollar you pay in interest on a debt is money that you could instead have used for savings and investments. When you’re retired and living on a fixed income, debt is even more problematic, as you can’t simply work more hours or ask for a raise at work to pay down your debt.

Even worse, the interest rates on credit cards and other forms of consumer debt can often top 20%, which is far greater than you could ever expect to earn from your investments. Although many retirees unfortunately do carry debt, eliminating yours before you retire is a good sign that you are financially prepared for life after work.

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While paying off your mortgage isn’t essential before you retire, it can relieve a huge burden from your retirement cash flow. As a home is typically the largest purchase you will make, your mortgage payment may very well be your largest monthly expense.

If you can manage to pay off your home before you retire, you can remove that expense from your monthly budget and divert it to other bills or your own discretionary spending. In consultation with a financial advisor, you may also be able to leverage your home equity during your retirement for other purposes. 

Having a life plan after you retire is important for two main reasons. First, it will allow you to chart out a more accurate budget and help prevent you from overspending. If your retirement plan is just to lay around the house and take each day as it comes, you’re more likely to give in to temptations like that “last-minute cruise” discount or buying things just to pass the time. With a bit of structure to your day, you’ll be less likely to give in to moment-to-moment spending distractions. 

Perhaps equally as important, having a life plan after you retire will keep your mind sharp and make the transition to retirement an easier process. Without things to do, you may become bored or even frustrated with your new retired life.

Although Medicare can shoulder much of the burden, it’s highly likely that you’ll need to fund additional medical expenses out of your own pocket. This is particularly true if you need long-term care.

Having adequate insurance in place is an essential step before you retire so you can avoid draining all of your savings due to the highly likely increase in your medical costs as you age.

Throughout your working life, you may have been supporting a wide range of people, from your kids to your parents to other relatives or even friends. By the time you retire, your cash flow may no longer be able to support all of these obligations, so you may want to defer retirement until your kids are no longer in school, for example.  

Your earnings record is one of the two main factors that determine how much you’ll receive in Social Security, with the other being the age at which you file for benefits. One step you should be sure to take is to work for at least 35 years. When the Social Security Administration calculates your benefit, it only uses your top 35 earning years as part of its calculation. If you only work for 30 years, for example, the SSA will include five years of zero earnings as part of your calculation, which can significantly drag down your future payout.

While you should obviously do all you can to maximize your earnings during this time, you’re not always in control of what you earn. So take the step that is in your control and post at least 35 years of earnings. 

If your health is declining, it might be time to retire even if you aren’t 100% financially all the way there. For starters, you may not have many years left to enjoy your retirement, and most people don’t want to work until the day they die.

Next, trying to maintain your work performance while your health deteriorates is likely to cause additional stress and could further worsen your medical situation. You’ll likely have to scale down your anticipated post-work lifestyle if you do retire earlier than expected, but with some adjustments, you can likely still live an enjoyable retirement away from the stresses of work.

In an ideal world, you’ll work in a job you love until late in life, getting paid for something you don’t even feel is “real work.” But many workers aren’t as lucky and get burned out at their jobs. Even if you haven’t quite yet reached your retirement number, you may be ready to retire if you simply don’t enjoy putting in the hours at your job any more.

Rather than grinding out hours at a job you hate, you could retire slightly earlier than expected and begin enjoying your life. You’ll have to make some concessions if you retire before your finances are quite where they should be, but cutting out a few extravagances from your life for a few years may be a more-than-fair tradeoff if your mental health is suffering from your current job.

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