Are you ready for retirement? Four questions to help you decide

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Many people dream of calling it quits and starting the phase of their life called retirement. But retirees often find the reality doesn’t quite match expectations. In order to avoid unpleasant surprises, you’ll want to make sure you’re really ready for permanent retirement. Here are some questions to help you decide.

Do you have a plan for what you want to do? When they first retire, many people want to relax and take it easy. But after a month or two, this can become tedious. You will soon become lonely and bored without social interaction and regular activity. Physical and mental stimulation will improve your quality of life and help extend your lifespan. But without the structure of a job to go to, it’s up to you to arrange your days. Whether you want to pursue a hobby, travel, attend social gatherings, do volunteer work, get part-time employment, or even pursue a second career, a program of activity will give your life a sense of meaning and purpose.

“If you love wine, there might be a local restaurant that needs a wine expert a couple of nights a week. If you love horses, find out if there is a local horse farm that you might spend some time at and earn some money doing something you enjoy,” says certified financial planner Mark Avallone.

Your vision for retirement will also determine your expenses, and how much you’ll need in savings, which brings up the next question.

Can you pay all your expenses? If you can barely pay your bills now, how will you be able to when you’re no longer receiving a paycheck? A majority of current retirees depend on Social Security for most or all of their income. You can get an estimate of your Social Security benefits at the Social Security Administration website.

But Social Security typically pays only a fraction of what you need to maintain your lifestyle. You’ll need to make up the difference from savings, pensions, or part-time employment. If your savings and pensions aren’t enough, you might consider working a bit longer.

Many people assume their expenses will go down in retirement. It’s true that you’ll no longer need work clothes or have daily commuting expenses. But some people want to travel or pursue hobbies.  Depending on your desired retirement lifestyle, your expenses may go down, stay the same, or even increase.

A good idea is to reduce your expenses by paying down debt or eliminating unneeded items. Eliminating credit card debt, car payments, and even your mortgage before you retire can go a long way to helping make sure your savings last.

Don’t forget one of the largest costs in retirement for many people: healthcare.

Do you have health insurance? Many people lose their employee health insurance when they leave their jobs. If you’re not yet eligible for Medicare, you’ll need to apply for private health insurance. You can browse your state’s health insurance exchange to see what coverage options and subsidies are available.

Will your income and savings last the rest of your life? If you’re in good health, your retirement might last 30 years or more. Can you sustain your lifestyle for that time without drawing down more than about 4 percent of your savings per year? Also don’t forget healthcare costs. The average retiree will spend about $250,000 on healthcare in their life. If you expect to need long-term care someday, you’ll want to budget for long-term care insurance.

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