5 Signs You May Be Ready to Retire Sooner Than You Think

When should I retire? That’s a question most Americans begin seriously asking by the time they reach their early 60s. For some, their Social Security full retirement age is the default answer.

However, it’s quite possible that you will be ready to retire sooner than you think. Here are five signs this could be the case.

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1. You’ve calculated your retirement expenses

The biggest obstacle for many Americans retiring early is money. How much you spend is, in many ways, more important than how much you make.

A key sign that you could be in a good position to retire early is that you’ve already calculated your retirement expenses. If you know how much you’ll spend in retirement, you can figure out how much income you’ll need to live comfortably.

There’s also another important thing to note if you have have performed a detailed analysis of your retirement expenses. It strongly suggests that you’re mentally ready to retire.

2. You’re prepared for handling healthcare costs

One expense warrants special atttention, though. Healthcare costs in retirement could be higher than you expect. Don’t assume that your healthcare spending from recent years will apply to your retirement.

If you retire before age 65, you will also need to have health insurance costs covered until you’re eligible for Medicare. Factor in monthly premiums, annual deductibles, and anticipated out-of-pocket costs in your calculations.

3. You’ve saved enough for retirement

After you have projected your retirement expenses, including healthcare, you can determine if you’ve saved enough for retirement. First, compare your expenses to the total guaranteed income you’ll receive in retirement from Social Security, pensions, and annuities. The gap between expenses and guaranteed income will dictate how much income you’ll need from other sources.

A quick and simple approach is to use the 4% rule. If you have saved enough money in your IRAs, 401(k) plans, or other retirement accounts so that an annual 4% withdrawal is sufficient to cover the gap between your projected expenses and guaranteed income, you could be financially prepared to retire.

4. You’ve stress-tested your strategy

To really be ready to retire, though, you’ll want to stress test your strategy. Don’t count on everything going smoothly during your retirement years.

Run worst-case scenarios that assume steep stock market sell-offs, surging inflation, and unexpected expenses. If your plan holds up relatively well under this stress test, you should be able to retire early with a higher level of confidence. You can find tools online that will help you with stress-testing your retirement strategy, by the way.

5. You’re ready to leave your job

Financial readiness for retirement is important, but there’s also another key consideration. You must be emotionally ready to leave your job as well.

This won’t be a problem for many people. Some dread going to work at the beginning of each week. Some are already partially checking out mentally while at their jobs. Retirement will likely be a welcome relief for these individuals. They’re ready to spend more time with their families and friends or on their favorite hobbies.

However, for others, work is a major part of their self identity. They wouldn’t know what to do if they didn’t go into their job every day. Their social connections center primarily on their workplace relationships. If these apply to you, you could be better off holding off on retirement.

The bottom line

There isn’t a single sign that clearly indicates you’re ready to retire. But if you can check off all five of the above signs, you should be financially and emotionally prepared for retirement.

The best retirement timing isn’t when you have to stop working. Instead, it’s when you have the freedom to choose when to retire.

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