As an IFA qualified financial coach, I talk to many clients who want help to achieve their goals.
The most common challenge I see people struggling with is knowing when to retire. We are thankfully not forced to retire when we reach a specific age any longer but giving us the choice to decide when can make it too easy to keep oil going for one more year, then another, then another.
Here the 7 signs that you are ready to retire.
1. Achievement of Retirement Goals:
The first sign you’re ready is when you’ve reached the financial goals you set for retirement. You need to have a set of financial targets or you’ll never know when you’re ready.
For example maybe you want to have paid off the mortgage first, maybe you want to see your youngest child through university first and most importantly you’ll need to have a target for the amount of money you want to have across all your savings and investments. That’s all your pensions, ISAs, cash savings and other assets combined.
You need a target that right’s for you
Once you’re clear on these financial goals and achieved them, then you’re ready to retire. Avoid the temptation to keep shifting the financial goal posts.
2. Financial Planning
Once you’ve achieve your financial goals, the second sign that you are ready to retire is when you have a sound financial plan in place for the lifestyle you’re hoping to have.
You cannot start your retirement without one – well you can but you risk not knowing how much you can safely spend each month to avoid running out of money too soon or on the other hand spending too little and not enjoying your retirement.
If you don’t know where to start on building your plan then do seek professional advice but there is a lot that you can do for yourself.
Planning the optimal way to take your income from the various sources you have can be complicated, particularly if you want to be as tax efficient as possible. Maybe you’re not sure if you want to buy an annuity with part or all of your pension savings and when would be the right time to do so.
My preferred planner to use is the free planner from Guiide
Again, seek professional help if you aren’t sure how to build your plan but once you do have a plan in place that gives you the lifestyle you are aiming for then you are ready to retire
3. Your health
Your health is a critical factor in retirement readiness.
Despite the average life expectancy currently being 81, the amount of healthy life years we can expect to live may be much shorter.
Retiring while you are still relatively fit and healthy should be your goal. Now I appreciate this is much easier said than done especially if you don’t have steps 1 and 2 in place – hitting your financial goals with a financial plan – but your time is way more important than any amount of money.
My mother was in very poor health for the last 20 years of her life – I’m sure many of you have seen friends and family in a similar situation. I don’t want to live the last 2 decades of my life the way that she did. I’m doing everything I can to stay fit and healthy.
If you are also still fit and healthy and have hit your financial goals then you are ready to retire. Do it now to enjoy your best years.
4. Emotional Readiness:
Do not underestimate the emotional challenges that come with no longer working. This involves being mentally ready to transition from a structured way of spending your time to a more flexible, self-directed lifestyle.
It might be a long time since you were self-directed in your life, if ever.
Yes at first it might feel great to no longer have to get up early, be answerable to your boss and have the total freedom to do whatever you want to do all day. Without structure and purpose to your days, you’ll soon risk your mental health declining.
We all need purpose to get us out of bed in the mornings.
Being emotionally ready for retirement is when you have faced into and mentally prepared yourself as much as you possibly can for challenges that come with this major life transition.
5. Satisfaction with Career Accomplishments:
If you’ve achieved your career goals or feel content with your professional accomplishments, this a good sign that you are ready to move on to the next phase of life.
Maybe the burning ambition you had when you were younger has gone. You’re proud of everything you’ve achieved and feel that you have nothing left to prove to yourself or anyone else for that matter.
When you’ve got to the point where you no longer have any desire to progress your career further then that’s a great sign. You’re ready to channel your energy elsewhere.
6. Social Network Outside of Work:
Retiring involves a big shift in daily interactions with other people. Most of us spend way more time with the people we work with than we do with anyone else. If you have good friends at work then you’re in a very fortunate position but you will miss these close connections when you’re no longer working with them.
Start building strong connections with family, friends, or community groups well before you retire so that you can maintain these connections afterwards.
If you watched my in depth interview with my friend Howard who retired, you will know how much he values the running groups he is still part of during his retirement. It gives him the continuity of social interactions in one part of his life to ease the loss of the contact with work friends.
It doesn’t mean that you won’t ever see your work friends ever again but how many times have you thought that you were good friends with someone while you worked with them only to never see them again when they moved to a new job in another company?
Once you’re confident that you have a solid foundation of social connections that are separate to those you have in the workplace then you’re ready.
7. Interest in Pursuing Personal Passions:
And finally, the biggest indicator by far that you are ready for retirement is that you have a very clear vision of what this next chapter of your life will look like.
I’m not talking about that cruise around the – although if travel is in your retirement goals then that in itself is a good vision to have. I’m talking more about your vision for how you will be spending your perfect ordinary days
You will have identified specific passions that you want to pursue in retirement. Perhaps it’s, volunteering, starting a new hobby such as wood working or writing that book you’ve always wanted to write.
Having a clear vision of how you want to spend your time in retirement is the best indicator by far that you are ready.