Hopes for an economic upswing may rekindle ideas of a blissful retirement, but when will you really be ready?
Nearly a third of working people aged 55 or older have less than $10,000 saved for retirement, according to a 2009 Retirement Confidence Survey. But even if you’ve saved more than that, deciding when to retire has gotten more tricky.
Our financial futures are uncertain, 65 is no longer the default retirement age and it can be difficult to determine how much you’ll need in order to really enjoy retirement (or at the very least live comfortably).
So if you’re approaching your twilight years, here are some signs that you might not be ready to retire just yet.
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You Haven’t Done the Math
Scenario: If you haven’t made lists or done any calculations to figure out just how you’ll cover day-to-day expenses, travel and holidays, you’ll have to give more thought to how much savings you’ll need to make it through retirement.
What you can do: If you’re among this group, or you just want to get a handle on what you’ll need to retire, there are plenty of online tools you can use to figure out how much you’ll need and what kind of lifestyle your money will afford you when you do decide to retire.
You Need to Play Catch-Up
Scenario: If you haven’t socked enough away in your 401(k), don’t panic. You have some options.
What you can do: If you’re 50 or older, you can make catch-up contributions of an additional $5,500 – that’s on top of the maximum of $16,500 if you’re under 50 - to your 401(k) or IRA to make sure you’re on track to retire when you want to, notes Kiplinger’s Personal Finance.
Recession Killed Your Retirement Funds
Scenario: Your retirement savings were cut nearly in half during the recession. The market seems to be improving, but you’re still uncertain.
What you can do: If you’re considering retirement and you’ve lost close to a third or more of your retirement savings, you may have taken on much more risk than you can handle. Find out whether you’re too old to be mostly invested in stocks or other high risk investments and adjust the way your retirement funds are allocated. You’ll want to minimize risk by investing conservatively. If you need help, find a certified financial planner.
You’ve Lost Your Pension
Scenario: Your pension plan has been discontinued and you’re worried that, without it, you may not have enough money to retire when you want to.
What you can do: First, find out whether your pension plan has been terminated or frozen.
It may seem counterintuitive, but you may be better off if your employer goes bankrupt than if your pension is just frozen or shrunk. That’s because employee pensions with companies filing for bankruptcy are covered by the government's Pension Benefit Guaranty Corporation, notes The Motley Fool. That means you should still be able to receive some if not all of what you’re due.
You Have Too Much Debt
Scenario: You have a substantial amount of mortgage or credit card debt which you’ll have to continue to pay off for the next several years.
What you can do: First, cut down on unnecessary spending to free up cash to pay the bills. Consider downsizing to a smaller home that’s cheaper to maintain. Next, use a debt reduction calculator to find out how long it will take you to pay off your debts. If paying down your debts seems impossible, get help from a reputable credit counseling agency via the National Foundation for Credit Counseling.
Out of Hand Expenses
Scenario: You’re concerned about covering all of your day-to-day expenses.
What you can do: Use an online calculator to determine how much you might be spending on utilities, health care, travel, meals, hobbies, gifts and other expenses. Next, identify what you’re willing to cut down on. For instance, if you still own the home that your children grew up in, you may be spending too much just for heating and cooling and could save money and energy just focusing on the rooms you usually occupy.
Drastic Measures to Pay the Bills
Scenario: You’re not a big spender, but in order to pay your bills during retirement, you might have to sell your home, get a reverse mortgage or take other drastic measures to get by.
What you can do: Downsizing your home might not be a bad idea and a reverse mortgage might give you an income in retirement if you’re not planning to leave your home to your heirs, but if you may end up struggling to make ends meet, you may want to reconsider retirement.
But that doesn’t mean work stress has to continue to wear you down. It’s never too late to consider a career change that could lead to more gratifying and enjoyable work. Plus, older people who have switched careers tend to have more flexible work schedules than in their previous jobs, according to AARP, meaning you could still have time to enjoy semi-retirement.
You Have Health Coverage Concerns
Scenario: You’ve got Medicare or you qualify for it when you retire, but you’re not sure if you can cover prescription drug costs.
What you can do: The easiest thing you can do to cut your prescription drug costs is to switch to generics. Beyond that, you can consider Medicare Part D, a prescription drug plan for which you’ll have to pay a monthly premium, but it could save you substantial amounts of money.
And if you’re on a limited income, drug companies may even provide you with free or cheap medications via the Partnership for Prescription Assistance.
You Like to Spend
Scenario: You see retirement as your time to live the good life, but you’re not sure if you’ll have enough to cover all of the cruises, early-bird specials and other outings you envision for your life after work.
What you can do: If you’re in relatively good health now, you may want to work a bit beyond 65 to help you afford little luxuries – and actually be able to enjoy them - when you finally do retire. Or consider part-time work. Online job search sites like RetirementJobs.com specialize in jobs for people over age 50.
You Need to Keep Busy
Scenario: You’re considering retirement, but you’re the type of person who needs to stay busy and feel productive.
What you can do: If you’re not as concerned about being able to afford retirement as you are about keeping yourself sharp and spry in your later years, volunteering is a great way to stay productive and social while still maintaining an easy and flexible schedule. AARP has a Web site where the retirement-aged can search for worthwhile volunteering opportunities.