Are You Financially Ready to Retire? Here’s How to Know

Retirement planning can feel like navigating a maze blindfolded. With so many variables at play, it’s natural to wonder, “Will I have enough money to retire comfortably?” While there’s no one-size-fits-all answer, there are steps you can take to gauge your financial readiness for retirement.

Firstly, take stock of your current financial situation. Calculate your assets, including savings, investments, and property, and subtract any debts or liabilities. This gives you a snapshot of your net worth. Then, estimate your retirement expenses. Consider factors like housing, healthcare, and leisure activities. It’s important to be realistic about your lifestyle expectations in retirement. A rule of thumb is you’ll need approximately 70% of your pre-retirement income, assuming you have no mortgage and own your home.

Early retirement planning is key. Are you contributing regularly to your Super? Aim to save at least 10-15% of your income for retirement, starting as early as possible. Use retirement calculators to project how your savings will grow over time and whether they’ll be sufficient to support your desired lifestyle in retirement. Remember, the earlier you start, the more time your savings have to grow. Another rule of thumb is to aim for at least 10 times the income you’ll need when you retire.

Another crucial aspect is understanding your retirement income sources. This includes Social Security benefits, pensions, rental income, and any other streams of revenue you expect to receive in retirement. Familiarize yourself with the eligibility criteria and potential payouts for each source, but it’s always best not to rely on this as rules change.

Furthermore, factor in inflation and longevity risk. Inflation erodes the purchasing power of your savings over time, so ensure your retirement plan accounts for rising living costs. Longevity risk refers to the possibility of outliving your savings. Consider delaying retirement or working part-time in retirement to mitigate this risk.

Lastly, don’t underestimate the value of professional advice. A financial advisor can provide personalised guidance based on your financial goals and circumstances. They can help you optimise your investment strategy, minimise taxes, and create a comprehensive retirement plan. Their expertise can make a significant difference in your retirement readiness.

Assessing your financial readiness for retirement requires careful consideration of your assets, expenses, savings, income sources, inflation, and longevity risk. By taking proactive steps and seeking expert advice, you can increase your confidence in achieving a financially secure retirement.

Let us help you retire right. Reach out to the JBS Financial team here.