11 Reasons You’re Not Financially Ready to Retire

Did you know that 64% of Americans aren’t ready for retirement? That means that only 36% of us will reach retirement and be able to live comfortably while enjoying our later years.

Wouldn’t it be alarming to reach your twilight years and have no plan, no income, and no disposable income for those picture perfect retiree cruises?

None of us want to enter retirement without what we need, but most of us just aren’t ready to retire. There are many reasons why a person wouldn’t be set up for a successful retirement, here are a few:

1. You Don’t Know What Retirement Costs Are Like

Most of us don’t know what it would cost to retire. It’s not the best idea to just come up with a figure and blindly go from there. Depending on the income you’d like to receive as a retiree, it can take some research to figure out exactly how much you’ll need to have saved if you want to live comfortably. 

When I began planning for my retirement, I figured out a total sum I’d want to have saved, and worked backwards from there to find out how much I’d need to contribute to my retirement account per year.

One way to calculate this was to find 80% of my desired income right before retirement. I ballparked that around $80,000 per year. Then I multiplied that by the number of years I’d like to be retired (I based this on how long my family members have lived, and what year I could retire with benefits).

For me, that was about 23 years of retirement! So for this example, the total cost of my entire retirement would be $1.8 million. Seems daunting, right?! 

The good news is, when you create a retirement plan, you set reasonable goals to reach this hefty sum, and retirement becomes completely attainable. I realized quickly that this $1.8 million wasn’t as far off as I thought! 

After you’ve figured out the cost of your retirement, don’t stop there! It’s time to make a plan.

2. You Haven’t Thought About Your Retirement Plan

Comfortable retirement is all in the planning. What kind of a lifestyle do you want to lead as a retiree? Do you envision yourself going on beach vacations yearly or living half the year down south? Or are you already a frugal person, buying secondhand items when you can?

Take your current and desired lifestyles into account when coming up with your retirement plan. 

Once you figure out the total amount you’ll need over the course of your retirement, it’s time to work backwards and see what you’ll need to save per month. If you have 30 years or more ahead of you until retirement, historically your investments might make 12%.

So, for the purpose of my situation, with 43 years left until retirement, an estimated return of 12%, and needing about $1.8 million to comfortably meet my living expectations, I only need to contribute about $88 per month to my retirement account. That’s about how much it costs for my phone bill! 

Check out this investment calculator to see how much you should save per month to reach your retirement goals.

3. You Don’t Have a Budget

In order to save towards your dream retirement, you have to set aside that monthly amount I just mentioned! Otherwise, retirement is just wishful thinking.

Part of contributing this amount to your account is all in the budgeting. Make sure you can afford to invest this sum, and if you can’t, you should switch up your budget to make it work!

It’s so important to make your money work for you in an investment account and plan for your future. 

One of the first things my husband and I do when our income changes is make a budget to reflect what we make and spend! Then we can set and reach our financial goals.

We certainly prioritize our retirement contributions – we have them pulled straight out of our paychecks! And we contribute more than that necessary $88, since we can afford it at this time. 

It’s up to you how much you can afford each month for retirement, but make sure you are contributing at least the minimum to reach your end goal!

4. You’re Not Someone Who Plans Ahead

One excuse that’s commonly heard among those who aren’t ready for retirement is that “they’ll cross that bridge when they come to it.” That’s a common misconception, and one many people regret buying into when they reach retirement age.

Financial success is all about planning ahead. 

You can’t reach your goals without setting actionable steps to get there!

Admittedly, I’m a planner. My husband – not so much. We had to come to the agreement that both of us would look towards the future in order to plan for comfortable twilight years. We couldn’t just put this decision off; we had to start saving for retirement now.  

Maybe you’re in a similar situation. Even if you’re “not a planner” this is one aspect of your finances that you certainly need to plan for. You never know if your working years will be cut short due to an injury or difficult life situation – and without any planning, you’d be left high and dry.

5. You Have Outstanding Debts

Another reason most people aren’t ready to retire is their outstanding debts. These contribute to financial stress already, and in retirement they would certainly be heightened.

Most retirees don’t have many ways to make additional income – they’re left to live off the money they saved up over their lifetime. If you have outstanding debts, part of your income in retirement will have to go towards these payments!

Currently, I’m working to pay off a car loan and school debts at the same time as I save for my retirement. I know that at this point, I wouldn’t be ready to retire! But, the sooner the better I pay off those loans, because they are accruing interest. 

In order to really be ready for that last day on the job, I have to pay off my debts and continue investing in my IRA. If you have outstanding debts like me, make it a priority to get rid of these well before you plan on retiring.

6. You’re Not Comfortable With Investing

If you think just putting aside money in a savings account at the bank will set you up for a great retirement – you’re probably mistaken.

I’m sure you noticed that in my example for our current retirement situation, I only need to contribute $88 per month to reach my retirement goals. That’s a total of around $25,000 over 23 years, but it totals out to $1.8 million in the end due to the anticipated return on my investment!

Imagine if I just put that $25,000 in savings! I’d miss out on a huge opportunity to set myself up for a comfortable retirement.

The good news is, if you’re hesitant to invest and uncomfortable with the risks associated – there are so many different investment options out there.

You can work with a financial professional to determine your risk tolerance, and choose a portfolio that feels right to you. Whatever you do, make sure you invest your retirement savings! I can’t stress this enough.

7. You Think Retirement Is “Too Far Off”

Let’s say you’re 18 years old, have your first job, and are just looking into your retirement options. You think to yourself, “I’ll start saving when I have more income – right now I need all I can get to go towards college.”

10 years pass, and you check into your new company’s retirement accounts, to see if you could start one. You still think “I’m only 28, what’s the rush? I have 39 more years until I plan to retire!”

And your thought process goes on and on, until you’re really nearing 67, and have no retirement savings to show from your years of hard work.

You get the picture! If you’re always pushing this important financial step to the next “phase of life” you’ll miss out on the gains your investments could be making, and you might miss out altogether on the benefits of a retirement account.

With this in mind, I opened my first retirement account when I was 19 years old, with a company I interned for during my breaks from college. I’m so happy that I started the habit of saving for retirement early, and now it’s an easy pattern to continue, because I’ve already seen so much growth in my account!

8. You Count on Social Security to Get You Through Retirement

Let’s face it – it’s tempting to just refrain from saving for retirement altogether and wait for the government to assist in our later years. After all, haven’t we been contributing to the social security pot all throughout our professional careers?

The thing is, social security checks aren’t guaranteed, and we can’t count on that as our primary income during retirement. It might be an added benefit to bolster our income, but it can only be seen as just that. 

It’s estimated that social security will cover around 40% of your pre-retirement income – which is a meager half of what most retirees will need to live on.

As a self-employed person, I contribute to both the employer and employee costs of social security. Imagine how tempted I am to just call it a day and pretend that will later be my entire retirement!

But I know that I need to continue saving for retirement despite the high costs of social security now. It won’t even begin to completely cover my retirement expenses in the future.

9. You Count On Inheritance to Get You Through Retirement

Back in 2005, my grandmother received an impressive inheritance at her mother’s passing. You could say her frugal parents were “closet millionaires!”

I remember thinking that maybe this would happen to me as my loved ones passed… it certainly was a sad thought, but it got me thinking that maybe I didn’t need to make so much money! Maybe I would be a trust fund baby!

These were certainly misplaced hopes. The more I learned about wills and inheritances, the more I knew that it’s best not to count on this income for retirement. The funds can be held up in legal battles for some time, and your loved ones might not even choose to leave you anything of monetary value. 

It’s best to save on your own for retirement, and not to count on the off-chance that you’ll receive an inheritance. 

10. You Don’t Think You’ll Want to Retire

I’ve definitely encountered individuals before who don’t plan on retiring at all. This can be a noble pursuit, and an indication that they certainly enjoy their work! However, anyone can be forced to retire at any time – due to unforeseen circumstances such as a disability, an injury, or an ill family member.

Plus, your retirement goals might change. I resonate with the need to work often, and to find purpose in my work. I never want to sit around doing nothing! I’m saving for retirement, but still planning on working in some capacity if I can.

Remind yourself that even though you might want to work throughout your golden years, it’s wise to have money saved that could supplement your income should you need it.

11. You Haven’t Opened a Retirement Account

And last but not least, the most obvious reason you’re not ready to retire might be the fact that you never opened an account dedicated to your retirement.

Several years ago, a company I worked for began offering an IRA (individual retirement account) for their employees, and I couldn’t decide if I wanted to spend money opening one and contributing.

After some discussion with my husband, we decided it was too good to pass up. The company was willing to match my contributions up to a certain percent! I had to take advantage of this offering – it was basically free money. 

Does your employer offer a matching plan with a retirement account? If so, don’t sleep on that opportunity. Even if you are self-employed and don’t have that option, you should open one for yourself and start contributing.

The most obvious way to start planning for your retirement is to open an account dedicated to saving up for your expenses as a retiree. This way you won’t be tempted to withdraw the money for other non-retirement expenses!

If you fall into any of these 11 pitfalls, the important thing to remember is that it’s never too late or too early to save for retirement. You can always get back on track! Don’t let your retirement creep up on you without making a plan and thinking proactively about this huge part of your life.

You don’t want to find yourself worrying about income after all the work you’ve done over your professional career. Avoid these pitfalls moving forward and begin setting yourself up for a comfortable retirement! Any step you take now to ready yourself financially for retirement is a step towards success.

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