You may have thought you knew how your final years in the workforce were going to go, but none of us could’ve predicted the havoc the last few years have wreaked on our finances. Pandemic lockdowns hurt many workers, rampant inflation has made everything a lot more expensive than it used to be, and the current bear market has taken its toll on investors’ portfolios.
That can leave older workers wondering if it’s even safe to retire right now. Here’s what you need to consider to make that call.
How much do you have in savings?
Make note of how much you have in all your retirement accounts. Don’t forget about old 401(k)s with previous employers, and if you have money in taxable brokerage accounts that you plan to use in retirement, keep track of those as well.
Think about how your savings stack up to where you expected to be by your current age. If you’re well behind where you thought you’d be, that could be a sign you’re not ready to retire yet. But if you’ve saved as much or more than you expected, you might be on track.
How much do you think your retirement will cost?
It’s good practice to review your retirement plan before you quit the workforce to make sure your savings are adequate. This is especially important right now when inflation has driven up costs on everyday expenses. Think about how you plan to spend your retirement and how you anticipate your spending habits will change once you leave the workforce.
You can use this information, along with estimates of your life expectancy and Social Security benefit, to figure out how much your retirement will cost. A retirement calculator can do a lot of the math for you. And if you haven’t saved enough, it will tell you how much more you need to save to achieve your goal.
What should you do if you’re worried about running short in retirement?
If you’re concerned you won’t be able to afford retirement right now, it’s best to remain in the workforce for a while longer if you can. Doing this will give you additional time to save for retirement while also reducing the total cost of your retirement as well.
However, sometimes retirement isn’t a choice. If you can’t continue working your regular job due to a health condition, being laid off, or caretaking obligations, you could think about getting a part-time job somewhere else or finding a work-from-home job if it’s feasible for you.
Beyond that, you have to do what you can to protect what you have and stretch those dollars as far as possible. Retirees typically invest more conservatively than people early in their careers, because they can’t afford major losses on the verge of retirement. But avoid investing too conservatively. Try to keep about 60% of your savings in stocks so you can capitalize on their higher growth potential.
Do what you can to reduce your monthly expenses, and look for other income sources to help with your monthly bills. Programs like Supplemental Security Income (SSI), for example, can help low-income seniors with their bills each month so they don’t have to drain their own savings so quickly.
Every person must decide for themselves if they’re comfortable retiring right now. But if you’re worried and able to continue working, it’s best to hold off until you feel confident you have enough money. You’ll enjoy retirement a lot more if you aren’t anxious about how you’re going to pay your bills.
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