How to know when you’re ready to retire

Are you ready to retire?

Retirement is a new phase of life, characterized by new needs and routines.

Entering it is a choice that isn't made lightly. There are many things to consider and decide before retiring, and many of them are financial in nature.

If you retire now, how much will you have to work with?

Looking at your current retirement funds against

your current monthly expenses can be an illuminating exercise. How long will your money last at the current rate of spending?

If it won't last very long, it may be necessary to work and save for a few more years before retiring.

It could also be a good idea to spend less by shaving off expenses wherever possible, whether this means downsizing into a smaller home or eating at home more often than in restaurants.

Those about to retire may need to plan for longer lives. Life expectancies are increasing, and being over-prepared is preferable to finding out later that retirement assets may not cover expenses for the rest of one's life.

Possible future expenses, such as increased medical or long-term care costs, are additional considerations.

What will your income mix be?

The proportion of retirement income from different sources will differ for every retiree. It's important to know how much will come from which sources, and how each of the sources works.

This includes determining when to begin to receive Social Security benefits, which may vary.

According to data from the AARP, the average retiree receives 57% of his or her income from Social Security benefits. Private pensions and annuities comprise 14% of the average retiree's income, while asset income makes up 10%.

Income from other sources represents 5% of the total. Retirees who anticipate re-entering the workforce, perhaps on a part-time basis, should try to make an educated guess about precisely how long they will continue working.

There are of course more questions those about to retire may need to ask, from where they envision spending their "golden years" to the role their children and grandchildren will play in their lives.

However, having financial matters settled gives retirees more freedom to make the right choice.

1 Fleck, Carole. "Infographic: Retirement Income Then and Now." AARP.org. October 23, 2014. 

http://www.aarp.org/work/retirement-planning/info-2014/retirement-income-infographic.html

Joshua Mellberg is an Investment Advisory Representative and licensed insurance agent. He is a sought-after speaker on retirement income planning strategies who has been featured on CNBC, PBS and Yahoo! Finance. After graduating from Western Michigan University with a business management degree, Josh started J.D. Mellberg Financial www.jdmellberg.com/), where he vowed to always offer clients a wide array of proven retirement products and services to help protect and then manage their assets to fit their goals.