Signs that you are ready financially to retireChen Wan Lim
Wouldn’t it be nice to throw in the towel, to travel the world and to live out the days of your life in an island resort with the most affordable places to retire? While not everyone has the luxury of retiring early or anytime soon for that matter, we can all take proactive steps in ensuring that that dream will come through someday. The key question however is, how do you know that you have enough money to retire, how many years does the average person work in a lifetime and at what age can I retire and where are the warm cheap places to retire? One sure-fire method is to crunch the numbers and determine how much money you would need each day, each month or each year for 30 years. But here are some in-depth signs that would indicate that you are financially ready to retire.
You are able to maintain your current or desired lifestyle without having to work anymore
Ask yourself this question, if you were to stop working tomorrow and stop receiving the income that you normally receive being employed, would you still be able to live your life normally for the next two or three decades and what would happen in future after you are leaving a job after 20 years? If the answer is yes, then chances are you are quite ready to retire. However, everyone has different definitions of lifestyles. Some might prefer to downsize their homes and to reduce their overhead expenses after retirement (this should ideally be the way) whereas some just want to maintain the status quo. Whatever the plan is, being able to survive without an active income is a good sign of retire smart.
You have steady passive income
This is perhaps one of the most important criteria to note if you are ready to call it a day. Passive income comes from many sources. More commonly, passive income can be derived from real estate rental income, interest income from cash deposits, cash dividends from company shares and royalties from the use of intellectual property. If your passive income is enough to sustain your daily expenses post-retirement, then you are ready to retire.
No unsettled large commitments
One of the main worries of not being able to retire is the existence of large financial commitments. Such commitments can be your housing mortgage, automobile loans, personal loans, children university fees and medical expenses. If you no longer have these major commitments or if your passive income is able to meet these commitments, then you can consider yourself ready to retire.
Your EPF savings is more than sufficient
Yes, one should not rely entirely on the Employees Provident Fund (EPF) savings to sustain the rest of your twilight years. But if your EPF account happens to be sufficiently large to sustain your daily needs and also sufficiently large to generate huge yearly dividends, then you could indeed consider retiring – this is provided you do not run into unexpected situations requiring huge sums of money to be spent.
These signs are not meant to be the sole determining factor in considering if you are able to retire with the amount of money you have versus the expected expenses you might incur. One would still need to plan and to factor in other unexpected considerations such as accidents and calamities in planning for retirement.