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5 Signs You’re Not Ready To Retire (Even If You Think You Are)

5 Signs You’re Not Ready to Retire (Even if You Think You Are)

At some point, we’ve all considered what it would feel like to retire early. When the alarm goes off early Monday morning and it takes every ounce of strength you have to roll out of bed, you’re probably wishing you could just hurry up and retire already.

But retiring early can have major consequences, and most people underestimate how much they’ll actually need to live comfortably. According to the latest Retirement Confidence Survey by the Employee Benefit Research Institute, 63% of workers are at least somewhat confident that they have enough money to last through retirement. Yet the average 401(k) account balance as of 2016 is just $96,000 — and that’s only enough to provide $3,200 in annual income over the course of a 30-year retirement.

So before you get too excited about the prospect of snoozing your alarm every morning, take a minute to think about whether you’re ready to retire. If any of the following five statements ring true for you, then it may not be worth the risk to retire now.

Man thinking with chin resting on hands
Image source: Getty Images.

1. You don’t have a clear monthly financial plan

You can’t know how much money you’ll need during retirement if you haven’t created a monthly budget. Make sure you have at least a rough estimate of how much money you’ll need each month to cover necessities, as well as the amount you’ll want to spend each month for other expenses — then add a buffer, just to be safe. It’s still a good idea to have an emergency fund during retirement, so make sure you’ll have one by the time you leave work for good; it’s harder to build up your savings when you don’t have a paycheck coming in every week or two.

You also need to think about whether you’ll make any major life changes during retirement, such as downsizing to a smaller house, moving closer to the grandkids, or taking that trip to Europe you’ve been dreaming about for years.

It’s not necessary to consider every single cost — after all, it’s impossible to know exactly how much you’ll be spending during retirement — but estimating how much you’ll need on a yearly and monthly basis is the first step in determining how much you need to save before you can retire in comfort.

2. Your backup plan is to continue working for years

If you retire and then find out you don’t have enough money saved to last through your golden years, you can just rejoin the workforce, right? Not necessarily. While you can start working again after you retire, it’s not wise to assume you’ll be able to jump right back in where you left off.

If you continue to work — even just part-time — after you retire, you may lose some of your Social Security benefits. For Americans who are approaching retirement, the Social Security Administration considers their “full retirement age” to be 66 or 67, depending on when they were born. If you claim Social Security retirement benefits and then start working again before you reach that age, you may not receive your full benefits.

According to the Social Security Administration, if you return to work before you reach your full retirement age, your benefits will be reduced by $1 for every $2 you earn above the annual income limit of $16,920. If you start working again the year you reach your full retirement age, in the months leading up to your birthday, your benefits will be reduced by $1 for every $3 you earn above…

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