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Can You Retire Yet? A 3-Step Self-Assessment

9/12/2016

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If you’re nearing retirement age, you’ve probably asked yourself this question many times: When exactly is the right time to retire? It’s a tricky question. Wait too late to retire, and you’ll miss valuable years of enjoyment and relaxation. Retire too soon, and you may find yourself in a challenging financial situation.

It’s a dilemma that nearly every retiree faces. There’s no surefire way to determine that you’re ready. There are any number of things that could happen in retirement that are impossible to predict today.


However, there are questions you can ask yourself to gauge your preparedness. Below are three such questions. If you don’t have good answers for these, you may have more planning to do. If you can answer these questions, though, retirement could be a viable option.

What are your projected expenses and income?

The first step in gauging your retirement preparedness is to determine whether your projected retirement income will cover your expenses in retirement. Start by creating a budget with your anticipated monthly expenses in retirement. Include both fixed expenses and discretionary items.

Next, itemize your projected retirement income sources and estimate the monthly amount you expect to receive from each source. Add up your income and compare it with your monthly expenses. Do you have enough retirement income to cover your expenses? If so, that’s a good sign you may be prepared. If not, you may need to do a bit more planning.

How will you cover an income gap?

If your income isn’t sufficient to cover your expenses, you’ll need to think about what steps you can take. You still may be able to retire. However, you may need to make some adjustments.

Examine your budget again and see what changes you can make. Could you downsize to reduce your expenses? Could you reduce your travel plans or some other discretionary expenses? Could you work part time to generate additional income?

An income gap doesn’t mean retirement is impossible. It just means you need to think through the issue and create an alternate retirement income strategy.

How will you pay for health care costs?

Many retirees assume that the answer to this question is obvious. After all, Medicare exists to pay for retirees’ health care expenses. However, Medicare doesn’t cover everything. Depending on your exact coverage, Medicare likely won’t cover premiums, deductibles, copays, long-term care, or hearing, dental and vision.

In fact, Fidelity recently estimated that the average 65-year-old couple will spend nearly $260,000 out of pocket on health care in retirement.1 That’s above and beyond what is covered by Medicare. That figure doesn’t include long-term care expenses, which could also be costly.

Determine how you will pay for these expenses. Do you have enough assets to cover them? Do you have a health savings account (HSA) that you could tap into? Do you have a long-term care insurance policy to cover long-term care costs? Again, if you can’t answer these questions, you may need to do more planning before you retire.

For more information, contact us at Coventry Financial. We can analyze your goals and your resources and help you determine whether you’re ready for retirement. If you aren’t, we can help you develop a strategy to improve your preparedness. Let’s connect soon and start the planning process.

1https://www.fidelity.com/about-fidelity/employer-services/health-care-costs-for-couples-in-retirement-rise

This information is designed to provide a general overview with regard to the subject matter covered and is not state specific. The authors, publisher and host are not providing legal, accounting or specific advice for your situation. By providing your information, you give consent to be contacted about the possible sale of an insurance or annuity product. This information has been provided by a Licensed Insurance Professional and does not necessarily represent the views of the presenting insurance professional. The statements and opinions expressed are those of the author and are subject to change at any time. All information is believed to be from reliable sources; however, presenting insurance professional makes no representation as to its completeness or accuracy. This material has been prepared for informational and educational purposes only. It is not intended to provide, and should not be relied upon for, accounting, legal, tax or investment advice.
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16078 - 2016/8/31
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  • Home
  • About
    • Our Team
    • Philosophy
  • Services
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    • Investment Planning
    • Estate Preservation
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  • Events
  • Blog
  • Contact