Top 5 Signs You Shouldn't Pack Your Bags for Retirement Yet

Congratulations! You’ve decided that life is more important than work. But wait, just what is the state of your nest egg? If the answer is scrambled, then you might not be as ready for retirement as you think.

No matter how old you are, retirement should be a goal you’re diligently saving for and working toward. For once, it would be nice to do nothing and not worry about getting caught at it. Unfortunately, and often due to a combination of poor planning and struggling to break free of bad financial habits, it might be time focus on your retirement savings.

So, before you sail on your retirement plans, here are the top five signs you shouldn’t back your bags just yet.

No. 5: You Count Swimming in Debt as Your Cardio

Worrying may be like paying a debt you don’t owe, unless what you are worrying about is the debt you actually owe. Ideally, you would transition into retirement debt-free so you could travel — or at least eat good on your new fixed income. Sadly, many potential retirees instead spend their time avoiding creditor calls.

For perspective, industry guidelines suggest that your mortgage expenses (including principal, interest, insurance and real estate taxes) should be no more than 28% of your pre-tax household income. Your total debt (housing debt, plus auto loans and credit cards) should be no more than 36% of your pre-tax income. That’s a lot of bank talk to say that having a lot of debt is a red flag for any retirement plans you’re making.

No. 4: You Shop Like You Can Buy Happiness

Shopping might be good for the economy, but not so much your bottom line. If you’re currently spending more than you’re earning, then you are not on track to retire.

The best time to get your spending habits under control is while you are still employed and have a better chance for raises and annual bonuses. This will allow you to grow your wealth as opposed to depleting it.

No. 3: You Forgot To Invest in Your Future, So It Asked for a Loan

You may know that a good investment strategy is to find something of value and pay a lot less for it, but that doesn’t mean you’ve actually done this. Diversification is great, but if you wait too long to help your investments along, you could be doing retirement all wrong.

For example, if you put your 401(k) on autopilot when you first started contributing and haven’t really checked it since, you may not be ready to retire. However, you also don’t want to take on too much risk as retirement gets closer, as this can cause your portfolio to take a hit. It can help to discuss your situation with a financial professional and determine whether you should rebalance your portfolio.

No. 2: Your Insurance Plan Is a GoFundMe Account

Though no one ever really feels they’ve saved too much on their insurance, having poor coverage or being under-insured can hurt your finances, especially when it comes to healthcare or long-term care. Yes, for those 65 and older or at full retirement age, Medicare is available, but it’s not free — and it’s getting more expensive by the minute.

The bottom line is you should not retire if you have not factored in medical costs.

No. 1: You Are Overly Confident You Will Never Have an Emergency

And now, the number one sign you shouldn’t pack your bags for retirement just yet is … you have no emergency fund or any type of savings for a rainy day. And if you fail to retirement plan, you plan on failing in retirement.

Without a cushion that can cover at least three to six months’ worth of expenses, you’ll eat into your nest egg more quickly than you think. Even though you aren’t receiving a paycheck anymore, the same unexpected emergencies can pop up in retirement.

This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.