Signs That Shows You're Ready To Retire

Retirement should be the time when we reward ourselves with the freedom from waking up at five or six in the morning to start preparing for an exhausting eight to 10 hours of work. Unfortunately, there are many cases wherein people retire without being ready. During these instances, retirement then becomes a daily struggle for survival. 

This then begs the question: “When is the right time to retire?” 

Retirement should not just be based on feeling or a certain age/time. When it comes to retirement, the most important aspect is to be financially independent. Thus, only financially independent enables a stress-free retirement lifestyle. 

While finding the right time to retire may be a difficult and often daunting task, there are certain checkpoints that would enable us to know that we’re ready to retire. 

Sign #1: You know how much it costs to fund your retirement lifestyle. 

There’s the usual household expenses, transport expenses, personal expenses. Further to these, there’s also the retirement lifestyle you would like to have. Would you like to tour the world, or just tour Asia? Would you prefer dining at restaurants or just eat at the food court?

An alternative method would be to base our retirement income needs at 75% of our pre-retirement income. 

Sign #2: You’re debt-free (or with minimal debt levels) 

It is important that before we retire, we should first resolve the majority of our debts to reduce the chance that we may misplan our retirement. This is because your assets will fluctuate based on market price, but your debt is fixed. 

For example Adam, a pre-retiree had saved up a retirement nest egg of $800,000 and he feels really proud of himself. His outstanding loans and credit card debt is only $200,000; his actual retirement savings is only $600,000. 

In the event of a market correction, his portfolio may drop by 30% to $560,000 yet his debt is fixed at $200,000 which would bring his actual retirement savings to $360,000. 

Sign #3: You have a retirement plan in place

It’s important to have a sizable retirement nest egg with solid retirement cash flow, it’s also important to have contingency plans in place in the event of medical, long-term care, and other related emergencies. 

Your retirement nest egg would include your cash savings, monies in the Central Provident Fund (CPF), Supplementary Retirement Scheme (SRS), investments, and retirement plans and annuities amongst others. This would provide a degree of guaranteed income, and non-guaranteed income, which would provide more stability for your retirement income.

You would also have medical insurance in place to hedge against outsized medical bills that could wipe out your retirement nest eggs, and long-term care plans in the event of severe disabilities.

Sign #4: You have met the objectives of your retirement plan.

Many people choose to retire early when they get retrenched. Not only is their retirement nest egg smaller, but they also start drawing down on their smaller retirement nest egg earlier. They could possibly cut back on spending and retire on less income. 

That’s one way to approach retirement, but it won’t feel good having to penny-pinch and continuously budget to ensure we don’t run out of funds during our retirement and having to go back to work in our 80s or 90s. 

One of the biggest regrets retirees often have is that they didn’t save enough for their retirement or that they started saving too late. If you haven’t set up a retirement plan and followed through on the plan, then you’re not ready for retirement. 

Achieving Financial Independence is the pre-requirement to Retirement and this doesn’t just happen overnight. It also doesn’t happen by luck or by chance.

If you feel that planning for your retirement is too arduous, you can seek professional help from financial advisers to develop your personal retirement plan that would enable you to live a comfortable life after retirement, with plans for various contingencies. 

Remember: The person who will take care of you when you’re old is the younger person you are today.