Vanguard Says You Shouldn't Retire Until You've Done This

Most people save and invest in their retirement plans for decades without considering how they'll know when they're actually ready to leave their jobs and retire. However, it's important to consider the full picture, including how you'll use your newfound downtime, as many people in retirement report feeling lonely or unfulfilled.

Because of that, it's important to make sure that you're fully ready to leave work and embrace your golden years. A recent Vanguard article listed three things to consider before retiring. Here they are, as well as some tips to ensure you're ready to take the leap.

Retirement readiness is about more than having enough saved

One important point Vanguard makes in its article is that retirement is unique to each person. 

Additionally, being ready for retirement is about more than having enough money saved. Changing from a full-time salary job to a fixed income is a big change, one that comes with transitions. Making sure you're prepared for those transitions is an important part of having a successful retirement, both financially and emotionally. 

Here are three questions future retirees should consider.

How do you want to spend your time?

The big question workers should ask themselves is how they want to spend their time. Many people enjoy traveling, taking classes, and staying active in retirement. Others might use retirement as an opportunity to volunteer more and give back to their communities. 

Some people start businesses or some type of paid part-time work. In fact, 73% of workers expect to have some type of paid work in retirement, according to the 2023 Retirement Confidence Survey. 

Finally, many people spend their time with others, playing sports or cards.

Regardless of which you choose, it's important to take time to think about how you want to spend your time in retirement before you stop working. That will help your transition to time freedom feel less shocking.

Where do you want to live?

According to an AARP survey, 75% of people over age 50 want to stay living in their homes when they retire. However, some retirees may consider moving to a different part of the country. After all, some states are more retirement-friendly with better tax options. 

Downsizing is a way for people to save money on housing costs, and some people may simply want to enjoy better weather. Taking the time to think about where you want to live can help you when making your retirement plan.

When do you want to retire?

Once you decide on the type of lifestyle you want in retirement and where you want to live, it will help you get a better sense of when you want to retire. Some people can retire earlier because they plan to downsize and move to a more affordable location.

Others may decide they want a nicer lifestyle in retirement and might need to work a few more years to make that possible. Ultimately, your retirement timing is highly personal, but asking yourself these questions ahead of time can help you decide when to stop working.

Delaying Social Security can increase retirement income

Even though most people focus on 401(k) balances, workers will likely have another source of income from Social Security payments. Retirees can take Social Security as early as age 62, but benefits grow roughly 8% a year after full retirement age until age 70. For that reason, many people wait before taking those benefits.

If you're married, speak with your spouse about the best time for each of you to take Social Security benefits, depending on your age and retirement goals.

Test drive a retirement budget for a year

If you want to try out your budget in retirement, Vanguard recommends that you test drive it while you're still working. That means only spending the money you plan to have each month in retirement and saving the rest. 

Doing this will help you decide whether you'll be comfortable on your retirement income or whether you need to reassess how much you'll actually spend in retirement.

Get financial planning if you need help

If you feel overwhelmed by the prospect of planning for retirement and you're not sure when you'll be ready to take the leap, consult with a financial planner. They can review your numbers, give advice about tax optimization, and ask important questions that can help you solidify your retirement plans.

Bottom line

Getting on track for retirement means more than hitting your ideal nest egg number. It also means planning how you want your days to look in retirement, how you want to spend your time, and where you want to live. Thinking about these decisions ahead of time can help your transition to your retirement years go more smoothly.