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10 Signs That You’re Financially Ready to Retire


Determining when it’s time to retire involves recognizing key financial indicators that signal readiness. Signs that show you’re financially prepared include having consistent income streams, low debt levels, sufficient insurance and a robust retirement fund. Identifying them can help you make a smooth transition into retirement, offering you peace of mind and financial stability for the future.

If you need help saving and planning for retirement, connect with a fiduciary financial advisor to discuss your areas of need.

1. You Have a Robust Retirement Savings Plan

One of the most critical signs that you’re ready to retire is having a substantial retirement nest egg. This may include 401(k)s, IRAs and other retirement accounts. Financial experts often suggest having at least 10 to 12 times your annual income saved by retirement age and having enough savings to replace about 70-80% of your pre-retirement income. If you’ve consistently contributed to your retirement accounts and your savings align with this guideline, it may be time to consider retirement.

2. You Have Little to No Debt

Having little to no debt is another important sign that you may be ready to retire. High levels of debt can strain your retirement budget and diminish your quality of life. If you’ve paid off your mortgage, car loans and other significant debts, it’s a good indication that you’re financially ready to retire. Being debt-free ensures that your retirement income can be used for living expenses and enjoying your golden years rather than servicing debt.

3. You Have a Diverse Investment Portfolio

A well-diversified investment portfolio that aligns with your risk tolerance and retirement goals is essential. This diversification helps protect your assets against market volatility. If your portfolio includes a mix of stocks, bonds, real estate and other investments, and you’ve seen consistent returns, it’s a sign that you might be ready to retire. Regular reviews with your financial advisor can ensure that your investment strategy remains sound.

4. You Understand Your Social Security Benefits

A man pets his dog while reviewing his financial plan for retirement.

Knowing how much you’ll receive from Social Security and the best time to start taking benefits is important for retirement. The Social Security Administration provides tools to estimate your benefits based on your earnings record. Claiming Social Security benefits as early as age 62 can reduce your monthly benefits by up to 30% since you’re taking them before your full retirement age (FRA), which is 66 to 67. But, delaying benefits until age 70 increases your payments. Each year you defer past your FRA, your benefits grow by about 8% due to delayed retirement credits, maximizing your Social Security income for life.

5. You Have a Clear Retirement Budget

A detailed retirement budget that outlines your expected income and expenses can help you prepare for retirement. This budget should account for basic living expenses, healthcare costs, leisure activities and potential emergencies. If you’ve created a realistic budget and feel confident you can live within it, it’s a strong indicator that you’re financially ready to retire. Regularly revisiting and adjusting this budget can help maintain financial stability throughout retirement.

6. You Have Health Insurance

Healthcare can be one of the most significant expenses in retirement. So making sure that you have adequate health insurance coverage is essential. Whether it’s Medicare, a supplemental policy or coverage through a spouse’s plan, having a health insurance plan in place reduces the risk of unexpected medical expenses, which can derail your retirement plans.

7. You Have Multiple Income Streams

Relying solely on Social Security might not be enough. Having multiple income streams, such as a pension, rental income, or part-time work, can provide financial stability. If you’ve established these additional income sources, you’re better prepared for retirement.

8. You Can Afford Long-Term Care

A couple smiles while walking on the beach after deciding that they're financially ready to retire.

Long-term care, including nursing homes and in-home care, can be expensive. According to Genworth, a long-term care insurance provider, the median cost of a home health aide in 2023 was $6,292 per month, while the median cost of a private room in a nursing home was $9,733 per month. If you have long-term care insurance or sufficient savings to cover these potential costs, it’s a sign that you’re prepared for retirement. Evaluating your need for long-term care insurance and understanding its benefits can protect your assets and provide for your care in later years.

9. You Have a Withdrawal Plan

A sustainable withdrawal plan from your retirement accounts ensures that your savings will last throughout your retirement. A financial advisor can help you determine what your safe withdrawal rate may be – that is the percentage of your portfolio that you can withdraw each year and not risk running out of money while you’re still alive. If you have a withdrawal strategy tailored to your financial situation and retirement goals, you’re well-prepared to retire. Regular adjustments to your withdrawal plan can help maintain financial security.

10. You Have a Strategy for Inflation

Inflation can undercut your purchasing power over time, making it essential to have a strategy to combat it. This might include investments that typically outpace inflation, such as stocks and real estate. If you’ve factored inflation into your retirement plan and feel confident that your income will keep pace with rising costs, it’s another sign that you’re ready to retire.

Bottom Line

Retirement is a major life transition that requires careful financial preparation. Recognizing the key indicators that you’re financially ready to retire – such as having a substantial retirement savings plan, minimal debt, a diversified investment portfolio, and a clear budget – can lead to a smooth and secure shift into this new phase of life.

Retirement Planning Tips

  • As you plan and save for retirement, it’s important to track your progress. SmartAsset’s retirement calculator can help you estimate how much money you’ll have by the time you retire and project whether your assets will produce enough income to support your needs.
  • A financial advisor can be a trusted guide as you navigate toward retirement. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.

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