How to Determine if your Financially Ready to Retire

When i started this blog, I promised it wasn’t going to be a money blog, and it isn’t, but after reading some posts of my peers who have become disillusioned in their retirement because they’re trying to live on social security alone, I decided to share what I learned regarding finances and retirement from working for twenty years in that industry.

Don’t retire dependent on Social Security

Please don’t retire dependent solely on Social Security! This is most important. Social Security was never meant to provide for you totally in retirement, but only as a supplement. If you don’t have a pension, retirement savings, or some other income stream, you may be not have enough money to live comfortably. Then the stress of trying to make ends meet will rob your joy.

Social Security is actually not that great of a deal. While it’s nice to have money coming in every month later in life, if you had put the same amount of money into a Roth or 401K retirement plan over the years, you would have thousands more at retirement. Plus, your heirs would be able to inherit any unused funds upon your passing. Unfortunately, that is not possible with social security. You may also lose benefits if you become incarcerated, even though you’ve contributed into it all your working life.

Old man with a calculator in one hand and his credit card in another sitting at a desk paying his bills.
Photo by Tima Miroshnichenko on Pexels.com

Social Security does have Cost of Living Increases, to help cover inflation, but it’s still not going to be enough for most people to live comfortably without additional income. Unfortunately, in the United States most of us don’t have the option to opt out of social security. Thankfully, though, it is a start and can provide a nice financial cushion throughout the remainder of life, especially for those who have not saved anything prior to retirement.

Other income streams

Pensions are wonderful if you’re fortunate enough to have one. Other than for government workers, pensions are few and far between these days as most companies have moved to Individual Retirement Accounts for their employees to contribute to their own retirement, often with a company match.

Individual Retirement Accounts are great because the savings grows over the years through compound interest, you can draw on it throughout your retired life and you heirs get to inherit the money it when you die. There are two types, a ROTH and a traditional 401K. Most investment professionals recommend the ROTH because it grows tax free through the years, meaning you pay taxes on the income going into it, but then never again on the growth.

However, if you don’t have a pension, retirement savings or any other type of income coming in and you are totally dependent on Social Security in retirement, here are some things to consider to make those dollars go further.

Become Debt Free

Hopefully, you haven’t thought about retiring until you are completely out of debt. This includes your home. You don’t want to be stuck with credit card debt and climbing interest payments during retirement. Even with savings or a pension, most people have less income during their retired years, so not having a mortgage or other debts is a big plus to your financial well-being.

If you’ve already retired and are unwilling or unable to wait until you’ve paid off your home, consider down-sizing. You probably don’t need as big of a house now and you can take that equity to pay debts.

Move to Another Country

It may sound crazy, but many retirees from the US move to a different country where the cost of living is much cheaper. You can live very comfortably in places like Panama or Mexico for just $2,000 – $3,000 per month. This might not be an option for some as you’d not want to move away from your family, but if that’s not holding you back, it’s something to consider. Just make sure you research to find a place that is safe, where you’d enjoy living and you can fulfill all the legal requirements. There are great travel Vlogs on YouTube where people share the pros and cons of living outside the US as well as many other online resources to help you navigate the process such as International Living to aid your research.

Trade your Home for an RV

A camper parked in a lovely spot with two lawn chairs, a guitar and a table with drinks siting outside
Photo by Kampus Production on Pexels.com

If living abroad is not your cup of tea, consider RV living. Many retirees simply sell their house and hit the road. They travel the USA and stay in national or state parks and other campsites. It is cheaper than maintaining a home and you’ll get to see the country while making great new friends in the process.

Find Another Income Source

Making money in today’s world no longer means just a nine to five job. There are plenty of ways to supplement your income without putting in all those hours.

Rental property is a great way to earn passive income. Even a small place can generate several hundred dollars of extra income each month. Just don’t go into debt to purchase it! If you already own rental property that you purchased earlier in life, you may already have a steady income stream coming from that to help support you in through retirement. If not, there will obviously be some cost involved initially, but over time the pay-off can be lucrative.

If you don’t have the money to purchase rental property, consider renting out a room in your own home. I know of a lady who lived in a large, beautiful home. They would rent the entire house out for thousands of dollars a week and then they would stay in the barn during that time. Inconvenient? Yes, but it allowed them to raise money to pay off their house!

Start a small business or part-time job

Maybe you’d like to start a small business or turn your passion into a business. You can work at your own pace and as much or little as you want when it’s your own. And if it’s your passion, it won’t even feel like work.

There are also many jobs today that can be done in your spare time. One of my favorite resources for this type of information is from Dave Ramsey. This list includes many jobs you can do from home and probably some opportunities of which you haven’t even heard. Besides providing additional income, working a few hours a week can help revitalize your mind, body and spirt, by keeping you moving, your brain functioning, and your social circle increasing.

Other than taking care of your health, solid financial preparation is the best way to make sure you have everything you want and need in order to enjoy your retirement to the fullest. But if you’re already retired and not where you want to be financially, don’t fret…you still have plenty of options. You may just have to get a little creative.

Be sure to know the condition of your flocks, give careful attention to your herds.

Proverbs 27:3

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s