Before determining your retirement readiness, keep in mind that the Social Security Administration (SSA) has increased the age when full retirement benefits can be approved so retiring at 65 may not be viable. Furthermore, the change from defined-benefit retirement plans to defined-contribution retirement plans has also changed the ball game for people who want to retire.
Are you ready to retire? You should consider not just your financial readiness but also your physical and psychological readiness. Perhaps, you want to continue working because you love your job and you enjoy the steady income. Perhaps, you want to retire to a tropical location and work as a consultant. Perhaps, you want to enjoy life while relying on your savings, investments and social security benefits.
Indeed, you have so many possibilities when you hit the 65-year mark. Let's assume that you want to either work on a part-time basis (i.e., as a consultant) or to enjoy life as a full-time retiree. In this case, here are the steps that you should take at least 5 years before your target retirement age.
- Take a look at your current budget. You will be surprised at the cost-cutting measures and the income-generating projects that will add to your savings account. The more savings you have, the better for your future.
- Discuss your investment portfolio including its contents, income, and strategies with your financial adviser. For example, you may want to shift from high-risk, high-reward investments (i.e., futures) to moderate- and low-risk investments with guaranteed rewards (i.e., CODs, bonds) so that your portfolio will not be compromised.
- Decide on the best time to cash in on social security. Sign up for Medicare and check the coverage on any other insurance, if any. Just be sure that your health and social security are covered in your retirement.