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Are You Ready to Retire? 4 Boxes to Check Off Your Retirement List

One of the constant refrains U.S. workers hear is that they don't have sufficient savings to retire. You can't go more than a week or two without reading in the news that another financial institution is warning that most people's retirement accounts are inadequate.

Midway through 2020, the Federal Reserve reported that the median retirement savings balance among all U.S. adults was about $60,000. The Fed's report estimated that by retirement age, the average U.S. worker's savings will have grown to $228,000. If you're an average U.S. worker, you might be asking yourself if that's enough to retire.

It might be. It might not be. Those saving for retirement all their working lives don't always have a true idea of what their retirement "number" is, what they need to have socked away in order to stop working.

Hitting a number, though, might not be the best way to look at it. In fact, being able to retire might be more of a checklist of conditions to meet. If you're wondering if you're ready to retire, here are four boxes to check off your list.

Enough income

The reason that hitting a specific savings number doesn't always tell the whole story is because nobody really knows how long they'll live. If you have enough money put away to live 25 years after you retire but you live another 10 past that, how will you afford it?

Instead, it's really more a matter of income. When you lose the income from your paycheck, will you still have enough money coming in each month or year to cover all your expenses? Income would include Social Security, investment income, and/or earnings from a pension or part-time job.

Reduced debt

One of the simpler ways to ensure you have enough income to cover your expenses is to lower those expenses. Lowering expenses is often easier than increasing or maintaining an income.

If you're headed toward your golden years, reducing debt can be a critical strategy. Do you have a mortgage you can pay off before retiring so that you don't have a house payment? Can you get any credit cards or auto loans paid before your income is reduced?

Taking debt into retirement means you're paying costs right when you retire as well as going forward, as debt interest continues to compound over time.

Healthcare coverage

Even when people are still working full-time, medical expenses can wreak havoc on a household's finances. As you get older, it's likely your healthcare needs will increase, which means it's important that your medical costs are covered.

Whether you'll continue to be covered by your employer in retirement, rely on Medicare, or purchase your own health insurance, it will be vital to know what your out-of-pocket costs will be. Healthcare coverage can be a significant part of whether you have enough income to cover all your expenses when you retire.

Emergency fund

According to the financial services company Bankrate, 60 percent of Americans would not be able to cover an unexpected $1,000 expense that comes up. And unexpected expenses don't suddenly stop popping up just because you've retired.

In fact, unexpected expenses can be even more devastating in retirement because you don't have the same earning potential to deal with any money you have to borrow to handle the matter. You'll want to make sure you have some sort of emergency fund that will cover car repairs, major household expenses such as new appliances or a leaky roof, and even medical costs that insurance won't fully cover.

The bottom line

Most Americans are conditioned to believe they have to hit some arbitrary "number" with their savings in order to be able to retire. But if you can check off the boxes for income, debt, healthcare coverage, and emergency expenses, you might be more ready to retire than you think.

This award was issued on 07/01/2023 by Five Star Professional (FSP) for the time period 10/10/2022 through 05/05/2023. Fee paid for use of marketing materials. Self-completed questionnaire was used for rating. This rating is not related to the quality of the investment advice and based solely on the disclosed criteria. 3,347 Houston-area wealth managers were considered for the award; 179 (2% of candidates) were named 2023 Five Star Wealth Managers. The following prior year statistics use this format: YEAR: # Considered, # Winners, % of candidates, Issued Date, Research Period. 2022: 3215, 176, 5%, 7/1/22, 9/20/21 - 4/8/22; 2021: 3133, 173, 6%, 7/1/21, 9/14/20 - 4/30/21; 2020: 3219, 174, 5%, 7/1/20, 9/30/19 - 4/17/20; 2019: 2,992, 209, 7%, 7/1/19, 10/15/18 - 4/26/19; 2018: 3,114, 218, 7%, 7/1/18, 10/27/17 - 5/21/18; 2017: 2,000, 228, 11%, 7/1/17, 10/24/16 - 5/24/17; 2016: 1,763, 437, 25%, 6/1/16, 10/16/15 - 5/16/16; 2015: 2,289, 408, 18%, 7/1/15, 10/16/14 - 5/16/15; 2014: 3,958, 410, 10%, 7/1/14, 10/16/13 - 5/16/14; 2013: 3,001, 504, 17%, 8/1/13, 10/16/12 - 5/16/13; 2012: 2,105, 425, 20%, 7/1/12, 10/16/11 - 5/16/12.
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Donald Terry Jr. is licensed in TX, AZ, CA, FL, GA, LA, MD, NV, NC, SC, OH, and VA to offer insurance products and life insurance (including variable life), annuities (including variable annuities), and is securities and advisor registered in TX, AZ, CA, CO, DC, FL, GA, LA, MD, NV, NC, OH, SC, and VA.

 

 Insurance products issued by Principal National Life Insurance Company (except in NY), Principal Life Insurance Company® and the companies available through the Preferred Product Network Inc. Securities and advisory products offered through Principal Securities, Inc., member SIPC. Referenced companies are members of the Principal Financial Group®, Des Moines, IA 50392. Donald Terry Jr., Principal National and Principal Life Financial Representative, Principal Securities Registered Representative, Financial Advisor, and a member of the Principal® Financial Network. Executive Benefit Solutions is not an affiliate of any company of the Principal Financial Group®. AIF ® (Accredited Investment Fiduciary ®) is an educational designation only, obtained by the holder by completing the requisite coursework. The designation does not mean the holder is acting in a fiduciary capacity. 2944762-072023

*Winners appearing on this page do not pay a fee to be considered or to win the Five Star Award. Professionals with a digital profile have paid a promotional fee.
Wealth managers do not pay a fee to be considered or placed on the final list of Five Star Wealth Managers. The award is based on 10 objective criteria. Eligibility criteria-required: 1. Credentialed as a registered investment adviser (RIA) or a registered investment adviser representative; 2. Actively licensed as a RIA or as a principal of a registered investment adviser firm for a minimum of 5 years; 3. Favorable regulatory and complaint history review (As defined by FSP, the wealth manager has not; A. Been subject to a regulatory action that resulted in a license being suspended or revoked, or payment of a fine; B. Had more than a total of three settled or pending complaints filed against them and/or a total of five settled, pending, dismissed or denied complaints with any regulatory authority or FSP's consumer complaint process. Unfavorable feedback may have been discovered through a check of complaints registered with a regulatory authority or complaints registered through FSP's consumer complaint process; feedback may not be representative of any one client's experience; C. Individually contributed to a financial settlement of a customer complaint; D. Filed for personal bankruptcy within the past 11 years; E. Been terminated from a financial services firm within the past 11 years; F. Been convicted of a felony); 4. Fulfilled their firm review based on internal standards; 5. Accepting new clients. Evaluation criteria-considered: 6. One-year client retention rate; 7. Five-year client retention rate; 8. Non-institutional discretionary and/or non-discretionary client assets administered; 9. Number of client households served; 10. Education and professional designations. FSP does not evaluate quality of services provided to clients. The award is not indicative of the wealth manager's future performance . Wealth Managers may or may not use discretion in their practice and therefore may not manage their clients' assets. The inclusion of a wealth manager on the Five Star Wealth Manager list should not be construed as an endorsement of the wealth manager by FSP or this publication. Working with a Five Star Wealth Manager or any wealth manager is no guarantee as to future investment success, nor is there any guarantee that the selected wealth managers will be awarded this accomplishment by FSP in the future. Visit www.fivestarprofessional.com.