“In this case, it might be better to keep the mortgage and use savings to meet retirement living expenses,” she says.
4. You know how you’ll cover your healthcare expenses in retirement.
You’ll qualify for Medicare when you turn 65, but this doesn’t mean your healthcare will be free. The monthly premium for Medicare Part B ranges from $244.60 to $594 in 2024, depending on income. Plus, there are additional costs if you purchase a Medicare Advantage (Part C) or Prescription Drug (Part D) plan.
If you retire before 65, you’ll need some other form of health insurance until you’re eligible for Medicare. One option is to purchase insurance on the federal marketplace at Healthcare.gov.
If you currently have a high-deductible health insurance plan, making pre-tax contributions to a Health Savings Account (HSA) is one way to save money to cover healthcare expenses in retirement. Unspent HSA funds carry over from year to year, even into retirement. Note that you will no longer be able to contribute to your HSA once you sign up for Medicare, but you’ll still be able to make tax-free withdrawals from it to pay for qualified medical expenses.
You should also have a plan for paying for long-term care or assistance with medical or personal needs over an extended period. Nearly 70% of people turning 65 today will need long-term care at some point in their lives,1 and Medicare does not generally cover these types of expenses. Consider whether Long-term care insurance (LTCI) is a good fit for your retirement strategy.
“Investigate your healthcare options ahead of time and make sure you know what the costs will be, so you can factor them into your retirement budget,” says Erenberger.
5. You are emotionally prepared to leave the workforce.
Finances aren’t the only factor in knowing if you’re ready to retire. You must also decide if you’re emotionally prepared to stop working. “For many people, their job is their identity,” says Erenberger. “You have to determine if you’re emotionally ready to give this up.”
The same goes for your social circle. If most of your friendships are with people at work, you should start building new relationships outside of work before you retire. For example, you could make new friends in your neighborhood, at a local gym or community center, through volunteering or at your place of worship, if you have one.
6. You know how you’ll spend your time in retirement.
The final retirement sign ties into being emotionally prepared to retire. After spending 40 years or longer working full time, retirement can come as a shock if you don’t have a plan for all your free time. “Not knowing how you will spend your time can have negative health effects, both physically and emotionally,” says Erenberger.
Maybe there are hobbies you’ve always wanted to pursue but never had time for, like gardening or learning to play an instrument. Maybe you’d like to spend time volunteering at a charitable organization. Or maybe you want to travel or spend time with your children and grandchildren, if you have them. The important thing is that you have a plan for how you will spend the time that you used to spend working.
Are you on track for the retirement you want? Our retirement calculator can help you track your progress.