Retirement is an exciting milestone in life, but if you retire before you’re financially ready, it could spell trouble down the road.
It can be tough to know when you’re ready to retire, as everyone will have slightly different situations and goals. But if you’re thinking about retiring in 2024, there are three signs it may be the right time.
1. You’ve met your savings goal
There’s no hard-and-fast rule as to how much you should save for retirement. Many people strive for $1 million, but some may need far more or even less than that to live comfortably.
It’s best, then, to calculate your goals based on your unique situation. One general rule of thumb is to have enough savings to replace around 80% of your pre-retirement income.
You could need more or less than this figure, though, depending on your situation. If you plan to travel extensively or pick up pricey new hobbies, for example, you may need more than 80% of your pre-retirement income. On the other hand, if you plan to cut costs drastically or move to a city with a much lower cost of living, you may not need as much.
Regardless of your specific goals, it’s important to have thought about how much savings you’ll need before you retire. It’s far easier to save more now than to go back to work later if you run out of money.
2. You know how much to expect from Social Security
Most retirees are entitled to Social Security benefits. While they likely won’t be enough to cover all of your costs in retirement, they can go a long way.
If you haven’t already done so, now is the time to check your estimated benefit amount. You’ll need to view your statements − which you can do by creating a mySocialSecurity account online. From there, you can see an estimate of your future benefit amount based on your real earnings.
Keep in mind that this number assumes you’ll be filing for benefits at your full retirement age − which is age 67 for anyone born in 1960 or later. If you plan to begin claiming before or after your full retirement age, it will affect your benefit amount.
Once you know how much to expect from Social Security, it will be easier to tell whether your personal savings will be enough. If you find that they’re falling short, it’s better to know that now while you still have some time to save.
3. You have a plan for health care costs
Health care costs can be extraordinary in retirement. In fact, the average 65-year-old couple retiring in 2023 can expect to spend around $315,000 on out-of-pocket healthcare expenses throughout retirement, according to research from Fidelity Investments.
Medicare can help cover some of those costs, but it may not cover everything − including routine exams, dental care and prescription eyeglasses. It also generally doesn’t cover long-term care (such as nursing home care), which can cost tens of thousands of dollars per year.
It can be tough to budget for health care expenses, as it’s impossible to say exactly how much you’ll spend. But taking steps like signing up for long-term care insurance, comparing different Medicare Advantage plans, or simply building health care costs into your budget can help you better prepare.
Retirement planning isn’t always easy, but the more thorough you are now, the better off you’ll be later. If you’ve already covered these three steps, that may be a sign you’re ready to head into the next chapter of your life.
