Am I Ready to Retire? 4 Steps to Prepare for Retirement

February 29, 2024 |read icon 8 min read
A husband and wife excitedly laugh while on a rollercoaster enjoying their retirement adventures.

If you’ve recently found yourself asking the question “when can I retire?”, you’re not alone. Google Trends reports retirement searches have remained consistently high since it first began tracking all search queries in 2004, with a surge occurring in January 2020 and again in January 2022. Despite that interest, many workers remain unsure about when—or even if—they can realistically retire.

According to a 2023 survey of the Employee Benefit Research Institute (EBRI), while just under two-thirds of American workers surveyed felt confident in their ability to have enough money to live comfortably throughout their retirement, only 18% felt very confident. In addition, one-third of workers surveyed planned to delay retirement to age 70 or beyond.

How will you know when you’re ready to retire? Follow these steps for retirement planning to get started. After reviewing it, consider consulting a financial professional to create a plan for retirement customized to your specific needs. If you don’t currently work with a financial professional, you can find one here.

Retirement planning step one: Decide what retirement means to you

The first step in creating a plan for retirement is to understand your goals and aspirations for your post full-time working life. Will you continue working in some other, more limited capacity? Would you like to travel? Take up new hobbies or creative pursuits? Are you considering purchasing a new home or downsizing from your existing residence? Once you truly understand your retirement goals, you’ll be able to create a plan to help you reach those goals much more quickly.

Retirement planning step two: Assess your financial and physical readiness

Assessing your current financial situation might seem like a challenging task, but it’s a critical next step to retirement success. Some elements to consider include:

  1. Current short-term and long-term savings. Use this calculator to see the difference saving now versus saving later can make on your retirement nest egg.
  2. Current traditional retirement income sources such as pensions, Social Security, investments and retirement accounts.
  3. Current and potential alternative income sources such as side businesses or consulting.
  4. Active insurance policies including long-term care insurance and disability income insurance that may help defray future healthcare costs.
  5. Any debt or obligations that might keep you from contributing to your retirement accounts.

Your current and projected state of physical health is also a key factor in determining when you’re ready to retire. According to the 2020 U.S. Census, the average life expectancy for Americans is just over 77 years. While Medicare recipients can expect to have the majority of healthcare costs covered throughout retirement, it won’t cover all health-related expenses. That cost could potentially exceed $150,000 over the course of your retirement years. The best way to manage those expenses? Build healthcare costs into your retirement strategy—and focus on improving your health day by day.

Retirement planning step three: Maximize your savings

If you plan to continue working for a few more years and want to build your savings for retirement effectively, here are some key strategies to consider:

1. Maximize retirement contributions. Contributions to tax-advantaged retirement accounts such as 401(k)s, IRAs and employer-sponsored plans can help boost your savings over time. Consider contributing the maximum allowable amount to these plans—and if your employer offers a retirement plan with matching contributions, contribute enough to take advantage of the full match. Use this calculator to see if you’re saving enough for retirement.

2. Take advantage of catch-up contributions. If you’re aged 50 or older, you may be eligible for catch-up contributions to accelerate your savings.

3. Invest wisely. In addition to your retirement accounts, adopting a diversified investment strategy can help you reach your long-term goals more quickly. Consult with a financial professional to ensure your investments are appropriately allocated.

4. Develop a retirement-first mindset. Now that you have retirement in your sights, it’s time to focus. Automate contributions to your retirement accounts, reduce expenses and redirect those savings toward your retirement nest egg, and pay down high-interest debt to free up even more money to save for retirement.

5. Reset your timetable for accessing your Social Security benefits. Consider delaying your Social Security benefits if possible. Delaying can lead to higher monthly benefits when you eventually claim them.

6. Consider a side hustle. While this tactic is not for everyone, you could also explore the possibility of earning additional income through part-time work, freelancing or a side business. Channel the extra income into your retirement savings.

Remember that consistency and discipline are key to building a substantial retirement nest egg in a relatively short time frame. Stay committed to your savings goals and adjust along the way to ensure you’re on track to meet your retirement objectives.

Retirement planning step four: Prepare mentally and emotionally for retirement

After working long and hard for a highly anticipated retirement, some new retirees find they’re not as emotionally ready as they thought they would be. Review the following areas and identify if there are any that could potentially cause you concern as you consider retirement:

  • Lifestyle changes. Retirement often brings about changes in daily routines, physical activity levels and social interactions. What will it mean for you? Will shifting from a structured work environment transition you into a more sedentary or isolated lifestyle? If so, consider how you might adjust your daily routine to maintain a vibrant life.
  • Financial stress. Anxiety or worry over your finances can erode your health and sense of well-being. A strong plan can help ensure that you’re ready for unexpected financial challenges.
  • Loss of social interaction. Whether you work in-person or remotely, your current job may offer you a key social network that will be difficult to replicate in retirement. To avoid loneliness and isolation, consider what social connections you can nurture or begin to help maintain your physical and mental health.
  • Health status. Once again, good health is a critical factor to a successful retirement experience. It ensures you’re able to get out and enjoy what you’ve worked so long to secure. It’s never too early to make your health a priority.

Start your journey today – or take the next step

While there are many calculators and quick assessment tools online that can give you a rough approximation of how much you should save for retirement, it pays to create a detailed, comprehensive strategy. This will guide you to, and through, this important period of your life.

Whether you create a plan alone or in collaboration with a financial professional, be sure to seek out answers to the following questions:

  1. Given my goals, timeline and financial situation, what investment strategies or retirement savings tools are best suited for me?
  2. When is the best time for me to start taking Social Security benefits?
  3. How can I minimize taxes in retirement?
  4. Given my current and projected health status, what should I budget for healthcare in retirement?
  5. How can I protect my assets during retirement?
  6. What strategies should I have in place to manage market volatility and/or unexpected expenses?

If you’re working with a financial professional, ask about any fees and costs you should be aware of associated with your investments and/or with their services. Then, once you establish a baseline plan, schedule time each year to review the plan and align it with your goals and changing circumstances.

Much like a successful, fulfilling retirement, a retirement strategy works best when you take the time to tailor it specifically to your unique wants and needs. Congratulations on taking this important step for your future!

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