How Do I Know if I Have Enough Money to Retire?

There are a wide range of factors to consider before you make the decision to retire. What, for example, is your current level of job satisfaction? How far do you live from supportive family members, particularly those grandchildren? What is the status of your and your spouse’s health? And then there’s the matter of those post-retirement goals – just how do you want to spend your golden years?

That said, there’s no denying one factor trumps the rest – can you afford to retire? It’s not always so easy to figure out. The internet is loaded with websites and podcasts offering advice on how best to build and sustain your nest egg but comparatively light on describing when you have enough in those accounts to retire comfortably. Here are some indicators to look for.

You Can Forget Social Security: Recent generations know firsthand what history teachers never taught you about the New Deal – that Social Security benefits in and of themselves are not enough to retire on. Those contemplating retirement must not expect the federal program to be their primary source of income but rather a supplement to begin drawing at 67 or 70; icing on the cake, not meat and potatoes.

The 10 Times Rule: It’s clearly best to draw your retirement income from a range of sources – pension, 401(k), stocks and bonds, you name it. But how best to determine if their collective value is enough to retire on? Financial planners point to the 10 Times Rule, meaning you can access 10 times your annual net take-home pay. Simply multiply the latter figure by 10 and compare it with the value of your holdings to determine if you have enough salted away to retire.

And the 4% Rule: Financial planners also look to the 4% Rule to ballpark how much cash you will need in retirement. The 4% in question represents the portion of assets you will withdraw from your portfolio each year in retirement. If that number plus your anticipated Social Security benefits at least matches your current monthly budget, you’re likely good to go for retirement. You can also reverse the process – 
multiplying your desired annual income by 25 can give you the amount you’d need in order to withdraw 4% from each year to live comfortably.

Prepared for Healthcare: Human mortality being what it is, the ever-escalating cost of healthcare must remain in the foreground of your retirement planning. Americans can access Medicare at 65 but every potential retiree must consider how best to finance their own regimen of treatments, checkups and prescription drugs. If you know how much you could potentially need to spend on healthcare and feel confident the resources are available – a big “if,” to be sure – then you have removed a major roadblock toward retirement.

Debt Free’s the Way to Be: A bit of a no-brainer, sure, but being debt free is a clear indicator you are financially ready for retirement. Paying off the mortgage is the obvious first step with auto loans following closely behind. Retiring these debts frees up more money each month to, well, retire on.

At Harmony Communities, we feel strongly that each resident has a sense of home. That they come home from work and feel pride in their environment and in their place in the greater community. That families are comfortable raising children in our neighborhoods, and that couples and singles know that they belong to something bigger than their four walls. In other words, we seek to create harmony within each community, making our communities not just passable, but peaceful, safe, functional, and beautiful.