8 Signs

You're not ready to retire

What steps do I need to take to prepare for retirement?

  • You may need 10 to 12 times your salary saved to retire comfortably.
  • It’s better to pay off high-interest-rate debt before you leave the workforce.
  • Determining your optimal Social Security claiming strategy is a must.

You may be thinking that it’s time to retire. It could be that you’ve hit the traditional retirement age, your employer offers a too-good-to-refuse buyout, or you’re simply burned out.

Other financial or personal signs, however, could indicate that you’re not prepared to call it quits just yet. Maybe you haven’t run the numbers to see if you can afford to retire. Or perhaps you haven’t thought about what you would do with all your new free time.

Here are eight signs you’re not quite ready for that sheet-cake send off.

1. You Don’t Have Enough Savings

“If you haven’t looked at whether you’re financially ready for retirement, you should assume you're not ready,” says Mari Adam, a certified financial planner with Mercer Advisors in Boca Raton, Fla.

So, how much savings is enough? It’s a big question for everyone, but your answer will depend largely on sources of income, anticipated expenses and the lifestyle you want to support. One useful guideline suggests you should have 10 to 12 times your salary saved up to retire in your mid-60s, Adam says.

If you fall short, you’ll need to make some adjustments.  

“Look at the variables you can control,” Adam says. “Postponing retirement is probably the most powerful variable you can change.” Every year you delay retirement is one less year you’ll be tapping into your nest egg and one more year for your Social Security benefit to grow.

Plus, it gives you more time to sock away money in retirement accounts with catch-up contributions. In 2021, workers ages 50 and older can contribute an extra $6,500 in a 401(k) or similar plan for a total of $26,000. And they can contribute an additional $1,000 in an IRA for a maximum of $7,000.[1]

2. You Don’t Have a Plan to Make Your Savings Last

You’ll be responsible for making sure your assets last throughout your retirement. And because it’s not uncommon for retirement to stretch beyond 20 years, you’ll want to do some long-term planning. For example:

  • How much do you spend each year now and will that change in retirement?
  • How will you minimize taxes when taking withdrawals from tax-deferred accounts?
  • Where will you invest your nest egg, so it keeps up with inflation but doesn’t take on too much risk?
  • What amount can you safely withdraw each year from savings without running out of money?

If you don’t have answers for these questions, working with a financial advisor before you retire can help.

3. You Have More than a Comfortable Amount of Debt

Carrying a mortgage with a low interest rate is usually not a problem for retirees, Adam says. But if you’re shouldering hefty credit card debt, you’ll need to address that before retirement.

“If you’re working and you can’t pay your bills without borrowing, which is what credit card debt is, how are you going to do it when you’re not working?” Adam says.

While you still have a paycheck, aim to pay off credit cards or other high-interest consumer debt.  

4. You Haven’t Planned a Social Security Strategy

Social Security is a foundation for many retirements and often a retiree’s only guaranteed source of income that rises with inflation.

The amount of your benefit is based on your earnings history, but when you elect to claim Social Security is also a major factor. Retirement benefits can begin as early as age 62, although your check will be reduced by up to 30% if you don’t wait until full retirement age (66 to 67). Those who delay even longer get a bonus: For every year they postpone Social Security beyond their full retirement age, their benefit goes up 8% until age 70.

Delaying can make a big difference financially for retirees with longevity in their family. Married couples also can coordinate their timing of benefits to maximize the survivor benefit after one spouse dies.

To get an estimate of future benefits, create an online account at SSA.gov/myaccount.

5. You Haven’t Addressed Future Healthcare Costs

Medicare will cover most of your hospital and medical bills starting at age 65. But if you get your health insurance through work and leave the job before Medicare kicks in, you’ll need to fill the coverage gap. You may be eligible for coverage under a spouse’s workplace plan, or you can buy an individual policy on your state’s health care exchange.

But a health care plan also means deciding how you will pay for long-term custodial care if you ever need it. And Medicare won’t help with that.

One option is to buy a long-term care policy, preferably purchasing it early enough while the insurance is more affordable and you’re still healthy enough to qualify, says Niv Persaud, a CFP and managing director of Transition Planning & Guidance in Atlanta. Another option is a hybrid life insurance policy that will help pay the bills if you need long-term care and, if not, provides a death benefit to your heirs, she says.

You also may be able to pay for long-term care out-of-pocket or to rely on family. Persaud says one of her clients plans to sell her house when she turns 90 and then move in with family. If she needs long-term care later, she’ll use the proceeds from the home sale to finance it.

6. You’ll Miss Work

There’s just so much golf, travel or home projects you can do before boredom sets in or you miss the daily structure that a job provides, Persaud says.

It’s not unheard of for a new retiree to do an about-face and go back to work.

Workers “don’t realize they are going to miss it, especially when they’re in that expert circle. People come to them because they’re knowledgeable. They are mentoring the younger folks,” Persaud says. “When they leave the workforce, they don’t realize how much that helped them with their sense of self.”

So before leaving the labor force, think about how you might use your skills, interests and newfound freedom to remain engaged in ways that fulfill you.

7. All Your Friends Are Co-workers

We spend so much time on the job that it’s understandable that most, if not all, of our friends are work colleagues, Persaud says.

“A lot of times people retire, and they think, ‘I’ll still go to lunch with my co-workers,’” she says. “But no, because you’re outside their daily activity, and they don’t really have time for that.”

Persaud advises clients to start building relationships in their community before retiring. And thanks to social media, it is easier now to reconnect with old friends, she says.

8. Your Dream Retirement Differs from Your Partner’s

It’s not uncommon for couples to assume they are on the same page about retirement only to discover they have far different ideas as the time draws near.

One might envision retirement at a lake house with lots of outdoor activities, while the other imagines downsizing to a big-city condo with a bustling nightlife. Or maybe one is counting on both retiring at the same time, while the other wants to work longer.

Couples should begin discussing how they want to spend their retirement 10 years before leaving the workforce, Persaud says. That way, expectations will be in sync.