Retirement is supposed to be a time of contentment and freedom. You’ve worked so hard to reach the milestone achievement of bidding adieu to a career-focused existence. Unfortunately, retirement doesn’t always play out that way. Many folks enter their golden years without enough savings or investments to live comfortably for the remainder of their lives.
Read Next: The New Retirement Problem Boomers Are Facing
Learn More: 4 Unusual Ways To Make Extra Money That Actually Work
Complicating the matter is the fact that there’s no one-size-fits-all, across-the-board magic number. The amount you need set aside for a roomy retirement depends on so many factors, including, but not limited to, your location, health and lifestyle wants. This is why it’s so important to work with a financial planner who can work with your specific situation and needs. That said, you can get a pretty good idea of whether your current retirement plan is on track by seeing whether it can pass these two stress tests that financial guru Suze Orman discussed in a new blog post on her site. Read on to find out if you’ll be ready to retire.
Test No. 1: You Can Comfortably Retire at 62
The way things stand, you can begin collecting Social Security benefits as early as age 62 . Now, this certainly doesn’t mean you should begin collecting that early, but it is an option, and it’s one that you may be strongly hoping will make sense for you if you’re retiring early.
Do a bit of a dress rehearsal in your mind (and in your budgeting book) and see whether retiring at 62 is a viable option.
“What would your retirement look like if you retired at 62?” Orman wrote. “Could you find part-time work to bring in some income? Could you continue with your plan to delay claiming Social Security? Would you have the mortgage paid off?”
This retirement plan “stress test,” as Orman calls it, should be conducted regardless of whether you want to retire at 62. Even if you plan to retire later, something could happen that forces you to retire at a younger age.
“A big percentage of people who have retired said they had the same plan, but they ended up retiring years earlier than they expected,” Orman wrote. “Not because they wanted to. Because their hand was forced: illness, a disability or being pushed out of a career job.”
Find Out: Cutting Expenses for Retirement? Here’s the No. 1 Thing To Get Rid of First
Test No. 2: Unexpected Expenses Hit (Inevitably, They Will)
Each of us is all too familiar with unexpected expenses. Perhaps it’s a medical issue that your insurance doesn’t cover. Or maybe it’s a surprise vet bill for your cat. It really doesn’t matter what it is; what matters is that these costs inevitably will strike.
With this stress test, you don’t necessarily need to scour your imagination to think of what financially-draining emergencies could happen; instead, you need to think of whether you will — throughout potentially decades of retirement — consistently be able to afford them without going into a tailspin of debt or financial discomfort.
“In a recent survey of retirees, 4 in 10 said they don’t have 3 months of living expenses set aside in an emergency fund,” Orman said. “And to be clear, I think 3 months is an inadequate cushion! You should have at least 8 months (preferably 12 months) of spending needs set aside ready to tap for any of life’s unexpected expenses.”
If your retirement plan fails either of these tests, it’s time to reassess, get more aggressive and, ideally, loop in a financial planner to help you get on track.
More From GOBankingRates
- Costco, Walmart and Other Stores With Perks Retirees Need To Be Taking Advantage Of
- 4 Subtly Genius Moves All Wealthy People Make With Their Money
- 21 Affordable Small Cities To Retire on the East Coast
- How To Start Investing In Real Estate - Even If You're Not Rich
This article originally appeared on GOBankingRates.com: Suze Orman: Can Your Retirement Plan Pass These 2 Stress Tests?
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
