The years of rest and relaxation (also known as retirement) are
some of the most dreamt about days. I mean, isn’t that what most people
work towards anyway? While the dream of retiring may seem close because, well,
you’ve spent enough time in the work force and now you ‘might as well’ retire, it’s important
to realise that many factors play a part in this decision. Financially speaking. The worst thing
you can do is go into retirement with no funds, savings or any income or money plan of sorts.
It would be a good idea to do yourselves the favour of preparing for your retirement long
before the day comes. So, in today’s practical wisdom video I’ll be going over a few things
that will tell whether or not you’re ready to retire, and how you can start getting ready.
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Now, let’s get into it.
8.You have a plan beyond social security payments
If you’ve done the math and realised that you won’t be relying on social security payments
for your retired life, you are, in fact, ready to retire. This is according to Jovan Johnson,
the financial planner of Piece of Wealth Planning.
The goal for anyone approaching retirement should be to have enough money to retire comfortably,
and receiving Social Security should just be the icing on the cake.
Finally, being self-sufficient in retirement is the best way to ensure your comfort since,
social security tends to end up taking a larger portion of the income you have than you think.
Many people forget that Social Security attests for a large portion of what most retirees spend
in retirement. You've most likely, quietly, amassed a sizable Social Security account that
will supplement your retirement income. Hence, before you think of retiring, you should always
have planned ahead concerning your social security and confirmed that you won’t be dependent on it.
7.You have 10 times your annual take-home pay saved for retirement
Financial planner John Bovard of Incline Wealth recommends a simple rule for determining
retirement readiness: ensure you have 10 times your net take-home pay. Many people find that
saving 15% of their annual income (including employer contributions) is a sufficient amount
of savings. For someone who starts saving at 25, putting about one to one and a half
times your income into your retirement fund by the time you are 35 is an achievable goal.
Having a comfortable retirement fund is not just about have enough for your day-to-day purchases,
but also for any unexpected costs you may have. If you follow the rule of thumb provided by Bovard,
you’re on your way to a fantastic retirement life.
On a side note, if any of you are interested,
I made a free retirement guide which access using the link the description.
6. You’re debt free
Before you even think about giving yourself away to your long-awaited days of freedom,
it’s important to pay off all your outstanding debts. This is a critical step. Credit card debt
or money owed for your car or house, for example, are all types of debt that you need to pay off.
The reason for this is to make sure you don’t have any more of these stressful payments during your
retired years – it’s hard enough staying on top of these payments with your 9-5, just imagine how
much worse it’ll be when you have no more active income! Nor the energy to tackle these problems.
Therefore, the secret here is to create a plan to paying off your loans. They are many way’s you can
begin paying off loans, some recommend paying off high interest loans off first, and others
advise the snowball method, where you begin with the smallest loans and go on from there.
Whichever method you go with, the goal remains the same – to pay off your debts and be debt free.
5. You are able to pay for your healthcare
It’s no secret that healthcare costs can be extremely expensive. In fact,
Bovard states that more people continue to work
just to become Medicare-eligible and this doesn’t happen until one hits 65.
Here is some bad news for you. In this life, we are all going to get old,
and the unfortunate thing with old age is that, we are more susceptible to sickness and
diseases. Therefore, it’s super important that you begin looking after your health right now,
because it’s only going to get harder as you age.
As you all know, healthcare is crazy expensive and to combat that, you need to make sure you
are ready for those costs early on. Asses your regular treatments and whatever prescriptions you
take and determine how much they usually cost. This will allow you to calculate how much money
you’ll need to be making to cover these costs till 65. Aside from your routine medical expenses,
also make sure that you have some extra funds packed away for any unexpected medical costs.
4. You’ve created a retirement budget
Although some people have the money set aside in a retirement fund,
most people forget this important step: creating a budget of their day-to-day
expenses to stick to. As a matter of fact, you should be budgeting even when you have
an active income coming in but doing so for your retired life is even more important.
Start by totalling your monthly expenses (things like rent, groceries, electricity,
etc). Then, identify your ‘wants’. This may include travelling, entertainment, shopping,
etc. Finally, add to this your projected social security benefits, retirement account
distributions, pension payments (if you receive them) and any other sources of income. With all
this, you now know exactly how much you’ll be needing for your monthly utilities and how much
extra you have to spend around for fun. As you should know by now, you’ll have limited
money in your retirement (compared to your active working days) so make the most of it.
If you don’t know how to budget, I made a free savings and budgeting guide for you
guys which you can access using the link in the description.
3. Your spouse agrees
Yes, yes, talking money isn’t the sexiest conversation you’ll have with your partner,
but it sure is an important one.
Retirement doesn’t just affect you, it also affects your partner. In a relationship and
family, communication is key, especially when it comes to household finances, as per Mark Hebner,
the founder and president of Index Fund Advisors Inc. If both of you agree that a good retirement
is the goal, make sure you’re having active and regular conversations about when you’ll be
hitting that goalpost. A good retirement is only fun when you’re emotionally and psychologically
prepared for it. Discuss with each other how you both plan to contribute to your retired
life. More importantly, (and obviously) let them know when you’re more than ready to retire. Team
work makes the dream work but only when the team members know exactly what the goal is.
2. You’re no longer supporting kids or parents
Are your children grown, out of the house, and earning their own money? If they are, then that
makes retiring a lot easier for you. Supporting elderly parents or children at home is becoming
more expensive as college and housing costs rise. If a couple has a household to care for,
they can’t downsize and begin reducing their expenses. Hence, if you’re still supporting
your kids or assisting your children in any way on a regular basis, you may want to postpone
your retirement plans for a while until you can ascertain that they’ll be doing alright
once you stop offering a helping hand to them. You may not want to rush into retirement if you
have elderly parents who require financial assistance or may require it in the future.
1. Your portfolio is updated
Did you know that there are three factors that can influence the ability of your
living off of your savings at the start of retirement? These are:
1.The size of your retirement savings or investment portfolio;
2.The expected growth rate of said portfolio in the future;
3.The amount of annual consumption required by you to maintain your lifestyle
If you have an investment portfolio, this is your time to really go through it and identify
how much of your lifestyle you can maintain once you retire. If you don’t have a portfolio,
on the other hand, it’s now time to get in touch with a financial advisor and get it
done. If your portfolio has suffered significant losses in recent years,
there is a chance your nest egg may not be as large as you thought it was. On top of this,
long term effects of the COVID-19 pandemic on retirement security are still unknown.
AS you get closer to retirement and start planning for it, you may want
to switch to a more conservative investment strategy to protect your retirement savings.
I don’t know about you, but when I think of retirement,
I think of rest and relaxation. The chapter of your life where you can finally enjoy the
fruits of your labour. But this dream will only come into fruition if you strategically prepare
for it long before its time. The sooner you start getting your finances in order,
the earlier you can retire and the more you can enjoy it.
So, thank you so much for watching today’s don’t forgot to get your
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With that being said, have a great day, and I’ll see you in the next one.