You may have a good general sense of how much money you need to retire, but you aren’t truly ready to retire until you understand what that means in day-to-day terms.
Have you explored “downsizing” your living expenses? You may know that your living expenses in retirement will likely be between 80% and 100% of your pre-retirement living expenses. Taking a gradual approach to downsizing your spending will let you significantly cut your monthly expenses without feeling the shock of adjustment. Take a close look at your monthly expenses and identify items you can do without. Start eliminating a few at a time.
Do you have a clear end game? You may have a good general sense of how much money you need to retire, but you aren’t truly ready to retire until you understand what that means in day-to-day terms. Compare your “retirement number” to your anticipated monthly expenses. Identify discrepancies and make adjustments as needed. It’s a good idea to have an up-to-date and comprehensive financial plan that gives you a clear picture of your financial situation and specific action steps to address any adjustments that need to be prior to retirement.
Where are you on your debts? You should understand what you owe and how much longer you need to work to get your debts cleared up.
Have you “right sized” your mortgage? You don’t need to pay off your mortgage necessarily, but need to make sure your mortgage payments are at a level you can afford in retirement. Downsizing your home can also be a real opportunity in retirement – it can cut your living expenses considerably.
Have you considered the different types of income sources available to you in retirement? There are many paths to a comfortable retirement; many different ways to patch together the right assets and investments to provide for your retirement. Even if your investment portfolio is not large enough to support your retirement needs, for example, you may find that you have other assets (a business, or real estate) that can contribute.
What would be the impact of continuing to work at your peak earning years on your quality of life in retirement? Even one or two extra years of work, during your peak earning years, may have a significant effect on your quality of life in retirement. Consider this question carefully as you plan when to retire.