Retirement is a dream being created. That’s what we’re saving for. But for many of us, persistent fear continues. Can we retire?
We worry that we don’t have enough money to support the 20-30 post-work job that we are used to.
There is one thing to worry about being able to afford a retirement, but ignoring the clear warning signs that you are out of reach, especially if you’ve been eagerly saved. Looking down on these signs will help prevent you from changing courses before it’s too late.
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Good news. There are obvious signs that you may never be able to retire, but there are also concrete actions you can take to change the path you seem to be doing. Let’s take a look at four of these signs and how to fix them.
1. You spend more than you earn
If you live beyond your means, the older you get, the more difficult it will be to retire. It saves excessively, undermines your ability to build emergency funds and quit your job.
When you are spending too much, you may take on debt. This can limit what you can do when you retire, such as buying a new car, pursuing a hobby, traveling, and more. You may spend too much while you are still working, but you can work longer than planned just to stay on top of the water.
How to change it: If spending gets out of control as you approach retirement, Tylerend, CFP, and CEO/co-founder retires are the time to make a dramatic change in your lifestyle. Housing tends to be the biggest part of our budget, so the downsizing of where you live can have a positive impact.
If you don’t want to change your home, then End prepares to change other big lifestyles to reduce your spending. It may be that you need to work longer, but at least you will be on the path to build a retirement nest egg and eventually retire.
2. Don’t know how your savings will generate income when you retire
Just because you’re saving money for retirement doesn’t mean you’re ready to quit your job. Aaron Cirksena, founder and CEO of MDRN Capital, says that if you don’t know how your money will generate a stable income when you retire, it’s a sign that you’re not ready to move on to the next chapter.
“People are used to actively keeping stocks,” Cirksena says. “It’s difficult to change the way of thinking from accumulating wealth to an income plan.”
If you don’t plan on how your savings will generate income when you retire, you can run out of money prematurely. This can cause financial anxiety, limit lifestyle choices, find part-time jobs, or get them back to work full-time.
How to change it: To ensure that your money will retire and last, Cirksena suggests you start at age 73, sitting with your financial advisor, in order to come up with a drawdown plan that suits your unique situation, taking into account taxes and minimum withdrawals required.
“It doesn’t matter how old you are and how long you are,” he says. “Let someone pass it objectively.”
If you want to know for yourself, there are some general guidelines you can follow, such as the 4% rule, the 80% rule, and the 25 rules, but they are not tailored to your specific situation. An online retirement calculator helps you understand how much you should spend on your retirement every year.
3. You have a lot of debt
If you are thinking about retirement, but still have a lot of credit card debt, that is a big indication that you are not ready to quit your job.
“If a lot of your retirement savings involve paying off your debt, you risk running out of money before you run out of oxygen,” says Steve Parrish, a professor of retirement planning at the University of Financial Services. “If you retire, you may pay your debts rather than enjoying your retirement.”
If you have a lot of debt at retirement, it can lower your disposable income, create more financial stress, and make it difficult to cover your expenses. At the very least, it may force you to compromise your lifestyle with retirement.
How to change it: First focus on paying off high profit obligations. There are several strategies you can adopt, such as lowering interest rates through balance transfers, reducing costs, leaking money to debt, getting part-time jobs, and giving bonuses and tax refunds on that debt. Make repayment of that debt a priority before you retire.
4. Social security needs to be taken early to support retirement
Social security is meant to supplement retirement income rather than a main source. If so, you probably say you should probably work longer.
“Getting Social Security early means mortgage your longevity,” says Parrish. “If the only way to do that through retirement is to take Social Security early, that’s a sign that you want to look for some other solutions.”
If you take Social Security before your full retirement age, 67, for those born after 1960, your lifetime payments will be reduced by up to 30%.
How to change it: In addition to working until your full retirement age increases your monthly Social Security benefits, it gives you more time to save.
“Working for another six months can make a huge difference,” says Parrish. “You’re putting more in your social security, but you’re still contributing to your 401(k), and you’re shortening the amount of time you’re spending.” Take a vacation if you’re burned out.
Ignore your danger signs
The good news is that all four are signs and not just a natural conclusion. You may be overpaid, staring at a high credit card bill, or not sure what to do with the money you have accumulated, but there are concrete actions you can take to ensure the retirement you want.
Certainly, you may need to tighten your belt, plan, or a little more work, but if you take action in recognition of today’s signs, you will set yourself up for a good retirement tomorrow.
