A once-struggling Maine mill town is being transformed by Colby College, along with the Central Maine Growth Council and others. Population is growing, as is the number of new businesses in the city.
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In 2016, the average retirement age in the United States was 65 for men and 63 for women, according to Annuity.org, despite the designation of 67 as the “official retirement age” (for those born after 1959).
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But what if you’re becoming more resentful of the presence of your job in your life? What if you’re daydreaming about retirement during work hours? Whether you’re 30, 40 or 60, you may be in a position where you’re ready to retire, particularly if you’ve been a close follower of the Financial Independence, Retire Early (FIRE) movement.But beyond feeling like you’re ready to retire, what financial signs might indicate that you’re ready to attend your last meeting — forever?Let’s walk through some financial signs that indicate your retirement readiness.Financial Signs that Point to “Retirement Ready”The best combination that points to “retirement ready” involves a combination of feeling as if you’re emotionally ready as well as making sure you have your financial ducks in a row. Here are the indicators that can help you make that all-important decision.Sign 1: You’ve taken care of debt.How much debt should you get rid of before you retire? Ideally, all of it. However, if you still have some hanging debt, here are a few items you can tackle:
Get rid of credit card debt. High-interest credit card debt can impede the money available to you in retirement, particularly because you’re living on a fixed income. The best way to do it? Stop using credit cards and figure out which of your credit cards has the highest interest rate. Make the minimum payments on your cards and pay more toward the credit card with the highest interest rate. Once you eliminate your highest interest rate credit card, tackle the card with the next highest interest rate. View eliminating your credit card debt as your most important job. You may not be ready to retire if you have ample credit card debt.
Pay off student loans. Do you still have student loans hanging around from undergrad or the MBA you got later in life? If you’re a FIRE Movement participant, you probably already realize that you should eradicate student loan debt before you retire. However, Americans over the age of 50 owed more than $260 billion in student debt in 2018, according to the Federal Reserve. You may have also co-signed loans for children or grandchildren, so remember that as well — that debt still counts, because you’re liable if your child doesn’t pay off the loan.
Eliminate your car payment. Ask yourself whether you need more than one vehicle after you retire. If you have two vehicles and decide you want to eliminate one from your fleet, you can sell one car and pay off the other with the proceeds. You’ll likely feel relieved that you go into retirement owning your vehicles free and clear.
Pay off your mortgage. Now, this one might give you pause. After all, you gain some tax benefits from lugging your mortgage around. Furthermore, interest rates are low right now. However, consider the cash you’ll free up when you’re no longer making mortgage payments. Because of this reason alone, it may be worth your while to pay off your mortgage before you retire.
Sign 2: You have health insurance.Whether you’re approaching the “traditional” retirement age or like to classify yourself as an individual who embraces the FIRE Movement, you still need health insurance. Consider the following:
Consolidated Omnibus Reconciliation Act (COBRA): You can tap into COBRA for 18 months after you leave your job as long as your previous employer offered health insurance and employed more than 20 people. You can use it if you’re currently unemployed and looking for new health insurance, but it’s important to understand that it doesn’t last forever.
Private health insurance: You can look into private health insurance, which refers to any health insurance coverage offered by a private company instead of a state or federal entity. Learn more about various plan types, your out-of-pocket costs and the doctors you can see.
Sharing programs: You can often find sharing programs that allow you to pay a monthly premium as a member. Money gets taken out of the shared pool when the healthcare sharing program must pay for members’ medical expenses. However, note that this is not health insurance.
Affordable Care Act health insurance marketplaces: Many people take advantage of health insurance through the Affordable Care Act health insurance marketplaces. Costs depend on several factors, such as your age, state, household size, income, whether you use tobacco and more.
Medicare: Most seniors age 65 and older are eligible for Medicare, but it’s important to know that Medicare doesn’t cover 100% of medical costs. You can purchase a supplemental plan, such as Medigap and Part D coverage, to help pay for services not covered, or use a Medicare Advantage Plan (offered by private insurers) to fill in coverage gaps.
Having everything on point with your health insurance can be one sign that your retirement strategy is down pat — but everything else has to fall in place as well. Insurance obviously can’t be the only sign that signals your retirement readiness.Sign 3: You’ve reached the magic number.The “magic number” refers to how much you’ve saved. Only you can decide how much you need to live off of in retirement. Unfortunately, the “magic retirement number” depends on things that are unknowable, such as your life expectancy. You can start by considering your current spending and saving levels and your lifestyle preferences in retirement.You may be able to withdraw 4% of your retirement savings each year, but remember that you need more. Your personal longevity, combined with a possible less-than-stellar economy in the future, means that saving 4% might not be enough. Do your homework so you know your ideal withdrawal rate ahead of time.These Aren’t the Only Financial SignsThree financial signs. Seems overly simplistic, huh? These three signs are meant to get you started on the path to retirement readiness. You may also need to build up an emergency fund, have a Social Security claiming schedule, understand taxes (including capital gains), put together a budget and more. However, taking care of debt, figuring out health insurance and understanding how much you need to save can help you take three giant leaps in the right direction.