Sign up for our FREE Monthly Email Newsletter
In addition to keeping in the financial know, you may be interested in checking your credit score and report.
¹The credit scores provided under the offers described here use the Equifax Credit Score, which is a proprietary credit model developed by Equifax. The Equifax Credit Score and 3-Bureau scores are each based on the Equifax Credit Score model, but calculated using the information in your Equifax, Experian and TransUnion credit files. The Equifax Credit Score is intended for your own educational use. It is also commercially available to third parties along with numerous other credit scores and models in the marketplace. Please keep in mind third parties are likely to use a different score when evaluating your creditworthiness. Also, third parties will take into consideration items other than your credit score or information found in your credit file, such as your income.
²The Automatic Fraud Alert feature is made available to consumers by Equifax Information Services LLC and fulfilled on its behalf by Equifax Consumer Services LLC.
³Equifax Credit Report Control™ is only available while you have a current subscription to Equifax Complete Premier. Locking your credit file with Equifax Credit Report Control will prevent access to your Equifax credit file by certain third parties, such as credit grantors or other companies and agencies. Credit Report Control will not prevent access to your credit file at any other credit reporting agency, and will not prevent access to your Equifax credit file by companies like Equifax Personal Solutions which provide you with access to your credit report or credit score or monitor your credit file; Federal, state and local government agencies; companies reviewing your application for employment; companies that have a current account or relationship with you, and collection agencies acting on behalf of those whom you owe; for fraud detection and prevention purposes; and companies that wish to make pre-approved offers of credit or insurance to you. To opt out of such pre-approved offers, visit www.optoutprescreen.com/.
4We will require you to provide your payment information when you sign up and we will immediately charge your card $4.95. After that, we will charge the card $19.95 for each month you continue your subscription. You may cancel at any time; however, we do not provide partial month refunds.
Equifax® is a registered trademark and Equifax Complete™ Premier is a trademark of Equifax, Inc. © 2014, Equifax Inc., Atlanta, Georgia. All rights reserved.
You may be physically and mentally ready to retire, but are you financially ready? The answer depends on a number of factors, including your health, your debts, and how well you’ve planned for retirement.
When can I retire?
There really is no “right” answer to this question as there is no magic number or dollar amount that you should have. That may not be the answer you were hoping to hear, but you must weigh the risk of quitting work and no longer receiving a paycheck against the real possibility that you may run out of money. That can be a scary proposition, but it is a real fact that you must take into consideration when you finally decide to retire.
Though you may not be able to escape every risk that you may encounter during your lifetime, there are some steps you can take in planning for retirement that may help reduce the risk of running out of money before you die.
Here are a few things you should consider as you try to decide whether you are financially ready to retire.
The amount of debt you have
Having no mortgage, no credit card debt, and no car payments may help reduce the risk of you running out of money. When living on a fixed income, the less money that is leaving your checking account, the better. The goal of having no debt by the time you retire should be at the top of your list.
(Read more: How to Retire at 40)
Medical bills can wipe you out. In 2013, NerdWallet Health said rising medical bills were expected to push 1.7 million American households into bankruptcy. Healthcare costs typically increase as you age, and it might be in your best interest to get a second opinion to ensure your future healthcare needs are not overlooked. Consider visiting www.letsmakeaplan.org and sitting down with a Certified Financial Planner™ (CFP) to evaluate all of the options you have to save money for and manage these costs.
The amount of money you have in savings
In addition to the money in your retirement savings accounts, you should have enough money to cover 18 to 24 months of non-discretionary spending. For example, if your monthly non-discretionary spending is $1,000, you should have at least $18,000 to $24,000 in savings, separate from the money that you have in your retirement accounts. When I say savings, I mean that this money needs to be in something that is safe, FDIC insured, and readily available with no penalties if you should need it.
You might ask, why so much? Let’s assume that there is a downturn in the economy that causes your retirement assets to go down in value. With this type of savings established, you would then have somewhere else from where to draw money—with the hope that your retirement accounts might have time to recover their losses.
Consider a practice run
Since practice makes perfect, consider making a “practice run” a year or two prior to retirement. Live only off the income you will be receiving from retirement, instead of your regular salary. To do this, calculate your Social Security benefits and add in any income you’ll receive in the form of a pension or retirement savings withdrawals. See if you can do it for an entire year.
If each month you are cutting it close, or you find that you cannot live on that income, you have two choices. You can either lower your standard of living, or you may have to take a part time job in retirement to supplement your income. It’s better to find that out beforehand rather than six months after you have retired.
When it comes to planning for retirement, I have always said that it is better to plan for the worst and hope for the best and to not leave major decisions to chance. While there are many other risk factors to consider when planning for retirement, if you begin by considering those discussed above, you will be well on your way to understanding your financial readiness.
Steve Repak is a CERTIFIED FINANCIAL PLANNER™ professional, CFP® Board Ambassador, and financial literacy speaker. He is also an Army veteran and the author of Dollars & Uncommon Sense: Basic Training For Your Money. Follow him on Twitter: @SteveRepak
The information contained in this blog post is designed to generally educate and inform visitors to the Equifax Finance Blog. The blog posts do not give, and should not be assumed to provide, personalized tax, investment, real estate, legal, retirement, credit, personal financial, or other professional advice. Before making any financial decision, you should always consult with the appropriate professionals who can explain your options, rights, and legal responsibilities, and advise you on any tax, legal, credit, or business implications that may result from those decisions. The views and opinions expressed by the authors of blog posts are their own views and may not be the views or opinions of Equifax, Inc. and/or its affiliates.
Equifax maintains this interactive forum for education and information purposes in order to allow individuals to share their relevant knowledge and opinions with other members and visitors. We encourage you to participate in discussions about personal finance issues and other topics of interest to this community, but please read our commenting guidelines first. Equifax reserves the right to monitor postings to the forum and comments will be published at our discretion. Do you have questions or comments about your Equifax credit report or customer-service issues regarding an Equifax product? If so, please contact Equifax directly. All opinions and information expressed or shared in blog comments are solely those of the person submitting the comments, and don't necessarily represent the views of Equifax or its management.