Deciding to hang up your hat and make the choice to retire shouldn't be a hasty decision. While the thought of never having to check your work email or sit through another Friday meeting is an enticing idea, you should make sure that you can handle all the extra time you'll have on your hands. Along with getting yourself mentally prepared to say goodbye to your job, you should also get your finances in order. If you've contributed very little to your savings and have a bad credit score and huge debts, retirement may not be right for you at this time. Here are a few financial things to consider before you decide to retire:
1. Minimize current expenses
To help contribute to your savings account, look at your finances and see what can be minimized. Moving into a smaller home, getting a mortgage refinanced and making sure your kids are financially independent are a few ways you can contribute more money to your retirement fund.
2. Take a test run
You may think that your expenses will decrease during retirement, but they won't be cut down as drastically as you may think. No longer paying for commuting and minimizing your family expenses can add a few extra dollars to your bank account, but you shouldn't rely on this to support you through retirement.
To help make sure you don't quickly use up your savings and retirement fund, make a budget for six months down the line. If you can live comfortably for those six months on your reduced budget, it may be a right time to retire.
3. Have a dependable health insurance plan
Medicare coverage usually starts when you turn 65, but if you plan on retiring before then, make sure you have reliable health insurance at your disposal. Getting coverage is important because if you need a costly procedure or sustain injuries from an accident, you will be stuck with an expensive bill. Without any health insurance, you will be responsible for the entirety of your bill and chances are you will need to use your savings to pay it off.
4. Pay down debts
One obstacle that may keep you from going into retirement is your level of debt. Continuing to pay off huge debts, whether it is a credit card balance or a car loan, can hinder your chances of saving. Enjoying your golden years will not be fun if you still have to take care of these debts. To figure out whether you are ready for retirement, take a look at your largest debt, usually a home, and see how much longer you'll have to pay it off. If you find that it will require a long time to take care of this debt, you may have to hold off on entering retirement.
To better help you pay for larger loans, look into refinancing or ask your lenders if there are any flexible repayment plans for retirees. Make sure these plans will work with your altered retirement budget as well.