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Are You Ready to Retire? 4 Boxes to Check Off Your Retirement List

One of the constant refrains U.S. workers hear is that they don't have sufficient savings to retire. You can't go more than a week or two without reading in the news that another financial institution is warning that most people's retirement accounts are inadequate.

Midway through 2020, the Federal Reserve reported that the median retirement savings balance among all U.S. adults was about $60,000. The Fed's report estimated that by retirement age, the average U.S. worker's savings will have grown to $228,000. If you're an average U.S. worker, you might be asking yourself if that's enough to retire.

It might be. It might not be. Those saving for retirement all their working lives don't always have a true idea of what their retirement "number" is, what they need to have socked away in order to stop working.

Hitting a number, though, might not be the best way to look at it. In fact, being able to retire might be more of a checklist of conditions to meet. If you're wondering if you're ready to retire, here are four boxes to check off your list.

Enough income

The reason that hitting a specific savings number doesn't always tell the whole story is because nobody really knows how long they'll live. If you have enough money put away to live 25 years after you retire but you live another 10 past that, how will you afford it?

Instead, it's really more a matter of income. When you lose the income from your paycheck, will you still have enough money coming in each month or year to cover all your expenses? Income would include Social Security, investment income, and/or earnings from a pension or part-time job.

Reduced debt

One of the simpler ways to ensure you have enough income to cover your expenses is to lower those expenses. Lowering expenses is often easier than increasing or maintaining an income.

If you're headed toward your golden years, reducing debt can be a critical strategy. Do you have a mortgage you can pay off before retiring so that you don't have a house payment? Can you get any credit cards or auto loans paid before your income is reduced?

Taking debt into retirement means you're paying costs right when you retire as well as going forward, as debt interest continues to compound over time.

Healthcare coverage

Even when people are still working full-time, medical expenses can wreak havoc on a household's finances. As you get older, it's likely your healthcare needs will increase, which means it's important that your medical costs are covered.

Whether you'll continue to be covered by your employer in retirement, rely on Medicare, or purchase your own health insurance, it will be vital to know what your out-of-pocket costs will be. Healthcare coverage can be a significant part of whether you have enough income to cover all your expenses when you retire.

Emergency fund

According to the financial services company Bankrate, 60 percent of Americans would not be able to cover an unexpected $1,000 expense that comes up. And unexpected expenses don't suddenly stop popping up just because you've retired.

In fact, unexpected expenses can be even more devastating in retirement because you don't have the same earning potential to deal with any money you have to borrow to handle the matter. You'll want to make sure you have some sort of emergency fund that will cover car repairs, major household expenses such as new appliances or a leaky roof, and even medical costs that insurance won't fully cover.

The bottom line

Most Americans are conditioned to believe they have to hit some arbitrary "number" with their savings in order to be able to retire. But if you can check off the boxes for income, debt, healthcare coverage, and emergency expenses, you might be more ready to retire than you think.

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This material was prepared by MarketingPro, Inc., and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate. Please note - investing involves risk, and past performance is no guarantee of future results. The publisher is not engaged in rendering legal, accounting or other professional services. If assistance is needed, the reader is advised to engage the services of a competent professional. This information should not be construed as investment, tax or legal advice and may not be relied on for the purpose of avoiding any Federal tax penalty. This is neither a solicitation nor recommendation to purchase or sell any investment or insurance product or service, and should not be relied upon as such. All indices are unmanaged and are not illustrative of any particular investment.

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The Five Star Wealth Manager award, administered by Crescendo Business Services, LLC (dba Five Star Professional), is based on 10 objective criteria. Eligibility criteria – required: 1. Credentialed as a registered investment adviser or a registered investment adviser representative; 2. Actively licensed as a registered investment adviser or as a principal of a registered investment adviser firm for a minimum of 5 years; 3. Favorable regulatory and complaint history review (As defined by Five Star Professional, the wealth manager has not; A. Been subject to a regulatory action that resulted in a license being suspended or revoked, or payment of a fine; B. Had more than a total of three settled or pending complaints filed against them and/or a total of five settled, pending, dismissed or denied complaints with any regulatory authority or Five Star Professional’s consumer complaint process. Unfavorable feedback may have been discovered through a check of complaints registered with a regulatory authority or complaints registered through Five Star Professional’s consumer complaint process; feedback may not be representative of any one client’s experience; C. Individually contributed to a financial settlement of a customer complaint; D. Filed for personal bankruptcy within the past 11 years; E. Been terminated from a financial services firm within the past 11 years; F. Been convicted of a felony); 4. Fulfilled their firm review based on internal standards; 5. Accepting new clients. Evaluation criteria – considered: 6. One-year client retention rate; 7. Five-year client retention rate; 8. Non-institutional discretionary and/or non-discretionary client assets administered; 9. Number of client households served; 10. Education and professional designations. Wealth managers do not pay a fee to be considered or placed on the final list of Five Star Wealth Managers. Award does not evaluate quality of services provided to clients. Once awarded, wealth managers may purchase additional profile ad space or promotional products. The Five Star award is not indicative of the wealth manager’s future performance. Wealth managers may or may not use discretion in their practice and therefore may not manage their client’s assets. The inclusion of a wealth manager on the Five Star Wealth Manager list should not be construed as an endorsement of the wealth manager by Five Star Professional or this publication. Working with a Five Star Wealth Manager or any wealth manager is no guarantee as to future investment success, nor is there any guarantee that the selected wealth managers will be awarded this accomplishment by Five Star Professional in the future. For more information on the Five Star award and the research/selection methodology, go to fivestarprofessional.com. 6,123 New Jersey-area wealth managers were considered for the award; 459 (8% of candidates) were named 2021 Five Star Wealth Managers. 2020: 6,210 considered, 480 winners; 2019: 6,097 considered, 477 winners; 2018: 4,383 considered, 415 winners; 2017: 3,868 considered, 664 winners; 2016: 4,143 considered, 626 winners; 2015: 5,063 considered, 672 winners; 2014: 3,315 considered, 646 winners; 2013: 4,049 considered, 733 winners; 2012: 1,312 considered, 400 winners.