3 Signs You Will Not Be Able to Retire Early
Many people are looking to retire early, but inflation has prevented that from being a reality for many people. There are a few signs that you might want to hold onto your current position for a few more years.
Large Amount of Debt
If you have a lot of debt now, it’s a bad idea to quit your current job. Debt can be a large drain on your hard-earned nest egg, so it’s a good idea to start reducing debt now. You may need to consider downsizing if you aren’t able to make good progress toward your debt. It might require you to work longer than you’d like, but it can also bring you greater peace of mind because you won’t have such high monthly payments. Getting rid of this type of debt means you won’t be paying interest, which can further strain your finances. If you have student loans, it’s a good idea to look at your options. Mortgage payments help you build equity in your home, but student loans don’t have that benefit, so you may want to consider a refinance. When you refinance student loans with NaviRefi, you’ll often get more favorable repayment terms, allowing you to focus on preparing for retirement.
Struggling to Pay the Bills
If you are already dealing with debt and struggling to pay the bills when you work full-time, retiring will not help matters any. You can expect to need around 75 percent of your current income during retirement, so if 100 percent of your income isn’t enough now, you may want to look for ways of reducing your current expenses. Your income during retirement will come from savings like 401(k)s and IRAs, as well as Social Security. Spend some time thinking about how much you can realistically expect to spend and receive after you quit working to see if the numbers line up.
No Monthly Plan
During retirement, your income will be much lower than it is now, but that won’t prevent bills from coming in. It’s important to have a budget so you have a general idea of what your cash flow will look like when you are no longer working. You will need to think about how much you will take out from your retirement accounts and when you will start receiving Social Security benefits. If you have a Roth IRA and a traditional IRA, you will want to take tax considerations into account. Some of these accounts have required minimum distributions, depending on your age. These may affect the amount you withdraw from each account.
Your cash flow plan should also take into consideration monthly expenses. This will depend on where you will live, as some areas are much more expensive to retire in than other areas. It is a good idea to have a couple of years of spending so you can look at each category to determine how much you may spend during your retirement. Know that there might be some changes, such as increased healthcare costs when you get older.