Dec 23, 2024
Looking to kiss your job goodbye, but you’re not sure if you can permanently hang up the closed sign on your career?
Maybe you’re one of the 4.1 million Americans turning 65 this coming year. Maybe you’re hoping to take an early exit from the work force, or you’ve pushed off your retirement date to ensure you’re truly ready.
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Whatever your situation, you’ll need to answer “yes” to these seven questions if you want to retire in 2025.
1. Do I have enough retirement income?
Now is the time to dig into the numbers and see if you truly have enough to sustain you during your retirement years.
First, take a look at your current spending and see whether that will change during retirement. Are you expecting to downsize your home? How will your travel costs change once you’re no longer commuting to work? Will you fully pay off your home at some point?
Next, think ahead for any large one-off purchases you can anticipate, like a new vehicle, home repairs or a bucket-list vacation.
Finally, scrutinize your retirement income sources — including 401(k)s, IRAs, pensions, annuities and Social Security payments — to see how much income you have coming in and how much is available to liquidate. Does it clearly match or exceed what you need to live on each year?
There’s a lot of variables, so it may be wise to work with a reputable financial adviser or use a retirement projection calculator to help answer this question with certainty.
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2. Do I have a clear retirement withdrawal strategy?
It’s not enough to have healthy retirement accounts — you need to be sure you don’t drain them too quickly. Not only could you run out of funds too soon, you could also push yourself into a higher tax bracket than necessary.
You’ll want to have a clear plan on which accounts to draw from so you can balance minimizing taxes with having enough cash throughout your lifetime. Pay attention to the tax advantages of withdrawing funds from different accounts.
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As for how much to withdraw, the 4% rule is a popular guideline but isn’t without controversy. Don’t forget that many retirement accounts have required minimum distributions once you hit 73.
You can also consider the question of when to start “withdrawing” from Social Security to maximize your benefits.
3. Am I clear on my retirement goals?
Knowing how you’ll spend your days now that you’ve kissed your career goodbye is just as important as having your finances organized.
Take the time to dream and visualize your ideal day during retirement. Do you want to volunteer at a pet shelter? Finally put pen to paper and finish that romance novel? Maybe even sell your home and travel around in an RV?
Having a plan in place ensures you don’t lose your sense of purpose once the retirement honeymoon period wears off — and helps you determine whether your finances match your aspirations.
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4. Do I have a plan for long-term care?
The truth is that as we age, there comes a point when you may no longer be able to care for yourself independently.
Even if your family members promise they’re willing and able to care for you in old age, circumstances can change over the years.
You’ll want to think about whether you plan on aging in place and getting help in your home or moving to a continuing care facility. With either option, determine if you will purchase long-term care insurance or self fund.
5. Is it better for my health to stop working?
Having a fruitful career can offer a lot of purpose to your life, and that has health benefits of its own. That said, it’s not worth it if working negatively affects your health.
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You can’t make up for lost time. Putting effort toward your health now is worth it, assuming you can afford to do so.
Even if you can’t afford to stop working entirely, consider how you can make up for gaps in income through part-time work or consultancy roles.
6. Have I created a clear health care plan?
Similar to long-term care, knowing how you’ll pay for health insurance and everyday health expenses can prevent any nasty surprises.
While Medicare Part A doesn’t cost anything for most people, Part B, Medicare Advantage, drug coverage and Part D comes with monthly premiums. You may even face additional costs if you go out of network.
If you plan on retiring before you turn 65, you will need to figure out how much you’ll need to pay in health insurance premiums until you’re eligible for Medicare.
7. Can I name the ways I’ll connect with friends and family?
Having an active social life helps us live more satisfying and healthy lives — even the Centers for Disease Control and Prevention (CDC) says so.
You’ll have more time during retirement, but the “easy” way to get social interaction each day disappears once you no longer have coworkers.
See if you can list out the ways you’ll create and maintain social connections, whether it’s scheduling in coffee dates, joining a book club or even volunteering in your community.
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Sarah Li-Cain, AFC is a finance and small business writer with over a decade of experience.
