And one other reason to keep working

Being ready to retire means more than being ready to stop waking up at 6:00 a.m. to put in long hours at a job you’re not thrilled about. If it were that simple, most of us would retire at 25. What it really takes to retire is a solid grasp of your budget, a carefully considered investment and spending plan for your life savings, debt that’s under control, and a plan you’re excited about for how you’ll spend your days. With that in mind, here are 10 signs you might not be ready to retire yet.


  • Your financial situation should be stable before you decide to retire.
  • A detailed projection of your retirement income and expenses is key.
  • Understand how taxes, inflation, and healthcare will affect your nest egg.
  • If you’re still happily working, don’t let an arbitrary age determine when to retire.

1. Struggling to Pay Current Bills

It goes without saying that if you’re struggling to pay your bills with a paycheck from work, retiring won’t make things easier.

Your Social Security check may be taxable, depending on your overall income.1 Most pensions are taxable.2 Withdrawals from 401(k)s and traditional IRAs will also be taxed.3 4 And without a job, you will not have access to employer-provided health insurance at favorable group rates. If you are 65 or older, you can enroll in Medicare, but Medicare is not entirely free.56

5. No Monthly Financial Plan

“Once you retire, paychecks stop arriving, but bills keep showing up,” Walters says. You need to map out your monthly cash flow before you retire, he adds.

Planning your monthly cash flow means considering when you will start drawing Social Security benefits and how much you’ll receive, in addition to how much you’ll withdraw from your personal retirement accounts and in what order.

If you have both a traditional IRA and a Roth IRA, for example, you have to think about the taxes and required minimum distributions (RMDs) on your traditional IRA withdrawals and how that affects your Roth IRA withdrawals, which won’t be taxed and aren’t subject to RMDs.12

Having a monthly plan also means having a solid grasp of your expenses, says certified financial planner Kevin Smith, executive vice president of wealth management for Smith, Mayer & Liddle (a division of Janney) in York, Pa. Ideally, you should have two to three years of actual spending history summarized by category, and you should analyze each category to determine how it might change during retirement. “Some expenses may go down, such as debts that may soon be repaid, whereas others, such as healthcare costs or travel and recreation expenses, may go up,” Smith says.

Knowing what your expenses will likely be means knowing how much income you’ll need. Once you know how much income you need each month, you can assess whether your nest egg is large enough to allow you to retire, or whether you need to keep working and saving and/or cut your anticipated retirement expenses.

6. No Long-Term Financial Plan

“You should understand how long your savings will last and what spending level you can maintain over the coming decades,” Walters says. “No one knows exactly how long they will live, but expanding lifespans and the increasingly high costs of long-term care may mean your portfolio will have to last longer and stretch further than you once thought.”

There’s a debate about how much you should withdraw from your portfolio each year. The popular 4% rule, which says you can tap 4% of your retirement assets each year, is projected to allow your money to last at least 30 years in most scenarios.

And you do need to plan for your retirement to last 30 years or more, Smith says. “Based on actuarial statistics, for a couple retiring at age 65, there is a 50% probability that at least one will be living at age 92 and a 25% probability that at least one will be alive at age 97.”

Depending on your health, your portfolio composition, and your risk tolerance, you’ll need to come up with a plan for the percentage of your assets you’ll spend each year—which might mean getting help from a professional financial planner.

7. Not Accounting for Inflation

Inflation will affect your day-to-day expenses and the value of your life savings.

An inflation rate of 3%, Smith says, would mean your expenses will double in less than 25 years—well within a typical retirement period. Overlooking the effects of inflation is one of the most common retirement planning mistakes and can have serious long-term implications if not properly accounted for, he says.

With average lifespans much longer than they used to be, you need to manage your money carefully to keep up with or outpace inflation to reduce your chances of outliving your savings. Treasury Inflation-Protected Securities (TIPS) will preserve your capital by paying enough interest to keep up with inflation and are considered extremely safe because they’re backed by the U.S. government.15

To earn investment returns that outpace inflation, look to stocks. Keep in mind that an 8% annual return is really only a 5% annual return after 3% inflation. Avoid keeping too much of your nest egg in cash and cash equivalents, like CDs and money market funds. Their interest rates are so low that you’ll be losing money.16 In the short term, you might not notice, but in the long term, you could run out of money sooner than you expected.

8. Not Rebalancing Your Portfolio

Taking a passive approach to investing can work when you’re younger and have plenty of years to make up for any market downturns that hurt your portfolio. But as you approach and enter retirement, it can be smart to rebalance your portfolio annually to focus on income generation and asset protection.

The accepted wisdom about how retirees should manage their portfolios consists of diversifying, preserving capital, earning income, and avoiding risk. Diversifying across a variety of asset classes (bonds, stocks, etc.) and industry sectors—healthcare, technology, and so on—helps protect your portfolio’s value when the market declines, since one instrument or asset class might be performing well when another isn’t.

Capital preservation means choosing investments that aren’t too volatile, so your portfolio value doesn’t fluctuate wildly. Dividends from stocks of big, established companies that have a long track record of performing well (or dividends from an index fund or exchange-traded fund made up of such companies) can provide a dependable income stream. And if you’re diversified and staying away from volatile investments, you’ve taken care of the risk-avoidance objective.

9. Retirement Worries You

“Even if your portfolio is in top shape, you may not be mentally ready to let go of your working life,” Walters says. “Working takes up a lot of energy, and some people may be anxious, rather than excited, to consider months and years of unstructured time ahead.”

If this sounds like you, think about pursuing a “second act” venture, working part-time, or becoming a volunteer for an organization you care about, Walters says. “If you just retire without a plan, however, you can overspend in an effort to combat boredom and run through your savings quicker than you planned.”

Cheng recommends test-driving retirement to gain a sense of how much money you will need and where you would feel comfortable living. It may not be feasible to retire in an expensive city, given your retirement savings and current living expenses. But you can empower yourself by getting clarity on your sources of retirement income and understanding your cash flow.

10. You Still Love Your Job

There’s nothing that says you have to retire just because you’ve reached Social Security’s definition of full retirement age. Just look at Warren Buffett, who’s still working at almost 90 and has no plans to retire. He does it because he loves picking stocks—not to pad his billions in net worth.17 If you’re excited about getting up and going to work in the morning, keep doing it.

Working has benefits beyond the financial. A job you enjoy engages your mind, offers social interaction, gives your days purpose, and creates a sense of accomplishment. All of these things can help you stay healthy and happy as you age. You also might be able to stay on your employer’s health plan and possibly get better coverage than you would through Medicare.

The Bottom Line

“The primary sign that you aren’t OK to retire is when you can’t answer the question, ‘Am I OK to retire?'” Smith says. “Retirement is a major life transition that requires ample preparation and planning.”

Sitting down with a fee-only fiduciary financial planner can help you answer the financial aspects of the retirement question, rebalance your portfolio, and, if needed, create a plan to pay down debt and reevaluate your expenses. It may even help you answer some emotional aspects of the question. Experienced retirement planners can offer insights based on their experience working with dozens of clients who faced the same decision.

Ultimately, the decision is up to you.