Retirement offers you freedom to do the things you always wanted to do but never had the time for. Listed below are several questions you should consider to determine whether or not you are prepared for retirement. You will know that you are ready to retire if you have realistic yet achievable retirement goals, are financially prepared for your retirement, and have a well-diversified retirement portfolio.
1. Do you have goals for what you want to do when you retire?
Retirement is all about realizing your dreams. Forget about the finances for a while, and put some quality time into thinking about the daily life you want to lead in retirement. What do you want to do when you retire? You may want to start a home-based business when you retire. You may want to travel. You may want to explore a life-long dream hobby. Make a written list of your retirement goals including your needs and wants. If your needs and wishes inspire you, you will know that you are doing the right thing.
2. Are you financially prepared?
Your readiness to retire will depend on whether you or your spouse are financially independent. Unless you or your spouse are financially independent, your retirement age will help you estimate the amount of savings necessary for your retirement and how long your savings will last. Take the time to assess your sources of income for retirement. While the debate continues as to whether or not social security will continue to be viable in the years to come, any income you receive from pensions, part-time work or a business will help you reduce the amount of income needed from your personal savings. If you are indebted, living paycheck to paycheck, or unable to save sufficient amount of funds for retirement, the best option for you would be to delay your retirement.
3. Is your portfolio well-diversified?
You may be ready to retire if you have taken full advantage of the free money offered through your employer-sponsored retirement plans. You can maximize the use of tax efficient investing by contributing into personal retirement funds. Your readiness for retirement is dependent on your ability to diversify your retirement investments by investing into different options such as real estate, stocks, mutual funds and businesses so as to not keep all your fiscal eggs in one basket. The worst thing that you could do is to depend on only one or two sources of retirement income in today’s uncertain times.