5 Signs You’re Not Ready to Retire

24141126_sMany people dream of retirement in all of its laid-back, schedule-free glory. But before you write your permanent resignation notice, you need to think long and hard about the consequences of leaving the workforce for good, because making your exit too early could leave you strapped for cash years down the road.

Here are five signs that you may not be as ready for retirement as you otherwise thought.

1. You’re behind on savings
The exact amount of money you need for retirement depends on your individual circumstances and goals. If you’re planning to spend your days tending to your garden or bonding with the grandchildren, then you’ll need a lot less than someone whose plan is to travel the globe. According to the Employee Benefit Research Institute’s 2015 Retirement Confidence Survey, 29% of workers think they’ll need to save at least $1 million to retire comfortably. On the other end of the spectrum, 20% think they’ll manage just fine in retirement even if they have less than $250,000 saved. The survey also found that the higher a household’s earnings, the higher its savings target tended to be. Households with incomes of at least $75,000 were three times as likely as those with lower incomes to aim for $1 million or more in savings for a financially stable retirement.

That said, regardless of their individual savings goals, most Americans fall far short of what they need to enjoy a financially secure retirement. The National Institute on Retirement Security reports that 92% of working households do not have enough money to meet their retirement savings targets. So you should plan conservatively and save aggressively to meet your savings goals.

2. You’re struggling with expenses now
Once you enter retirement, you’ll be living on a fixed income, which means you’re likely to have less spare cash than you do now. According to a new survey by the Center for Financial Services Innovation, 57% of American adults are presently struggling financially. If you’re one of them, you may want to rethink your retirement plans until you get a handle on your current expenses. Study your living costs now, while you’re still working, and identify ways to reduce them. This may include downsizing your home or reducing the amount of money you spend on entertainment. You need to reach a point where you can comfortably make ends meet based on your working income before you can even contemplate living on even less.

3. You have a lot of debt
When you’re living on a fixed income, debt can be a huge drain on your limited resources. According to a 2015 report by The Pew Charitable Trusts, older generations are increasingly entering retirement with debt. The study found that 80% of baby boomers (roughly 51- to 70-year-olds) and 56% of retired members of the silent generation (roughly 71- to 91-year olds) hold at least one type of debt. If you still have a large amount of debt, you’re better off delaying retirement until you can reduce or eliminate that load. Ideally, start by paying off bad debt, like that high-interest-rate charge you’ve been carrying on your credit card. From there, you can work toward paying off “good debt,” such as your mortgage. Remember: The longer you carry debt, the more interest you’ll end up paying, and at a time in your life where you may not have an opportunity to increase your earnings, losing money to interest charges doesn’t make a whole lot of financial sense. You’re much better off entering retirement with a clean slate.


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