According to a survey conducted by the Transamerica Center for Retirement Studies in 2021, about half of American employees agreed with the statement, “I don’t have enough money to save for retirement” (TCRS). In addition, 57% of workers said they intend to work in retirement. “Financial reasons” were cited by 80% of those who responded. As a result, if you want to retire someday, make sure you can afford it. Here are five indicators that you aren’t quite there yet. 1. You are in a lot of debt In an ideal world, you’d be able to retire debt-free. Of course, for many people, this is unrealistic. Having some debt, such as a mortgage, isn’t always negative. There’s only an issue when you’re in a lot of debt. According to industry standards, your mortgage expenses (principal, insurance, interest, and real estate taxes) should not exceed 28% of your pre-tax household income. Your overall debt (housing, vehicle loans, credit cards, and other debts) should not exceed 36% of your pre-tax income. You are not ready to retire if you are already trying to keep your debt below these percentages. 2. Your expenditures are more than your income Shopping is good for the economy but not for your bank account. You’re not on pace to retire if you’re currently spending more than you’re earning. While employed, you may believe that you can always make up for bad spending habits by acquiring a higher-paying job, getting that annual bonus, or even getting a promotion. Those opportunities are no longer available when you retire. That’s why it’s critical to bring your spending under control right now by setting and keeping to a budget. 3. Your emergency fund is depleted Even if you are no longer receiving an income, unexpected expenses can arise in retirement. An unplanned auto repair or unanticipated emergency room expenses can derail a retirement plan and result in an unexpected cash constraint. Retirees should have at least a year’s worth of expenses saved in a liquid and conservative investment like a money market fund, short-term CD, or high-yield savings account. You are not financially prepared for retirement if you do not have that. 4. You haven’t looked at your portfolio in a while You may not be ready to retire if you set your 401(k) on autopilot when you initially started contributing and haven’t examined it. As you get closer to retirement, taking on too much risk can be pretty dangerous, and your portfolio could take a significant knock just as you retire. It’s critical to make the most of what you’ve put aside during your retirement years. As you get closer to retirement, you should adjust your portfolio away from growth-oriented assets and toward a wealth-preservation approach. 5. You don’t have enough insurance It’s critical to have enough insurance coverage in retirement, especially regarding health insurance. Medicare is offered to anyone aged 65 and up, but it is not free. Many people get supplementary insurance, and it’s crucial to factor in prescription expenditures. A person should not retire if medical costs are not incorporated into their budget.
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