It can be difficult to figure out when you are truly ready to retire. Some people aim for a certain retirement age, perhaps 62 or 65, while others set a financial goal, such as $1 million in a retirement account.
There are signs and targets that can signal that you are prepared to retire, but they’re not all about your age and how much money you’ve saved. “Getting ready to retire isn’t just about finances, it’s about being emotionally ready as well,” says Jamie Hopkins, director of retirement research at Carson Group in Omaha, Nebraska.
Here’s how to tell if you’re ready to retire:
— You are financially prepared.
— You have eliminated debt.
— You have a plan to cope with emergencies.
— You have health insurance.
— You have a social network.
— You have something else to do.
You Are Financially Prepared
You should have a handle on what your costs will be in retirement and where you will get income to cover those expenses. “Retirement planning is not about saving to hit a magic number, it is about income,” Hopkins says. “So, you need to know what your savings, pensions, Social Security and other assets can generate in income, and if this income will meet your retirement needs.”
Some people reach retirement age without enough saved to leave the workforce and maintain a comfortable lifestyle. “Working a bit longer is typically the single best way you can improve your retirement income security,” Hopkins says. “Working just six months longer can be like saving an additional 1% to 2% of your income for 30 years.”
You Have Eliminated Debt
Outstanding debt makes it especially difficult to retire because you have to pay for past as well as future expenses. While some people maintain a mortgage and car loans in retirement, it’s best to eliminate outstanding loans, high-interest credit card debt and student loans before you retire. Having low or no debt allows you to use your savings and retirement income for current expenses.
“Put together a game plan, get organized, pay off your mortgage and fund your 401(k),” says Ken Moraif, CEO and senior advisor at Retirement Planners of America in Dallas.
You Have a Plan to Cope With Emergencies
While it’s essential to have a plan to cover everyday bills, you will also need strategies to manage emergency expenses in retirement. “What people worry about in retirement is the unknowns,” says Greg Hammer, president of the Hammer Financial Group in Schererville, Indiana. “If you have a plan, you won’t panic when events occur. You should have a plan for when the market crashes, a plan for when a spouse passes or when a catastrophic event happens.”
You Have Health Insurance
If you currently receive health insurance though your or a spouse’s job, you will need to purchase another form of health insurance before you retire. Many people wait until age 65 to retire so they will qualify for Medicare. Those who retire before age 65 must pay out-of-pocket for replacement health insurance.
You Have a Social Network
Your job often becomes a part of your identity. “You say you’re a doctor or a business person,” Moraif says. When you are near retirement, “you’re coming to grips with the fact that you won’t be that person.”
If you socialize primarily with people you work with, you will need to form a new community. “Once you are not at work anymore, you lose that social network. You won’t be around them. You won’t have lunch with them. You’ll miss the company trip. That’s all gone,” Moraif says. “The whole social side of going to work that’s been such a big part of your life is coming to an end.”
[READ: 25 Things to Do When You Retire.]
You Have Something Else to Do
Some people have saved plenty for retirement but are scared to walk away from a job that has supported them for decades. “When you’re ready to retire is, first, an emotional decision, a psychological decision, and secondly, it’s a financial decision,” Moraif says. Moraif has several clients who are financially able to retire but choose to delay retirement as their retirement date approaches. “Sometimes it takes them another six months to get psychologically prepared to retire.”
It can be helpful to practice retirement and start taking on new activities that interest you. “Don’t do it cold turkey. Figure out what you want,” Moraif says. “What charities or what communities do you want to work for? Who are the people you need to contact? Picture what your retirement will look like.”
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Update 08/24/20: This story was published at an earlier date and has been updated with new information.