Liz Pulliam Weston

The Basics

10 signs you're not ready to retire

Before you report for your last day of work, be sure that you've taken care of these details. You could save yourself a whole lot of money and regret later.

By Liz Pulliam Weston
MSN Money

The retirement party may be scheduled, the RV may be packed, and you may have perfected the speech where you tell your boss what you really think.

You may think you have enough money and a good idea of what you'll do with your time. You may even have dodged the ways you could blow your final years that I detailed in "5 ways to wreck your retirement."

But you're not really ready to retire if any of the following are true:

1. You don't have a budget. For most of your working life, trying to estimate your expenses in retirement has been a guessing game. It's hard to know, 20 or 30 years out, what your future life will look like.

As you bear down on retirement age, however, you should have a much better idea of your expenses and the income that is supposed to cover them. Although some costs should drop, such as work clothes and commuting, those savings may be more than offset by increased spending on travel and hobbies.

Consumer Reports has a worksheet to help you detail your pre- and post-retirement expenses. (Your investment income shouldn't exceed 4% of your portfolio -- more on that in a minute.) If your post-retirement expenses exceed your expected income, you'll need to work to trim them or plan on working longer to boost that income.

Consumer Reports also recommends that you try living on your retirement budget for a few months to make sure it actually works before you stop working.

2. You're expecting to live on interest and/or dividends. If you're really rich or you plan to live like a monk, this might work. But yields have fallen by about half in the past 20 years, and many companies cut their dividends during the recession. In today's world, most of us need to discard the idea that we can't touch our principal or that we can put all of our money in low-earning investments.

Let's take that latter idea first. Sticking to low-risk investments such as certificates of deposit and Treasury bonds may give you a feeling of safety, but that's an illusion. Eventually inflation will return, eroding the value of those investments and your spending power. Even a 3% inflation rate will cut the buying power of a dollar in half over a 20-year retirement. You'll need at least some exposure to stocks if you want to overcome that erosion.

As for never touching principal -- well, most of us won't have saved enough for that to be an option. We'll have to spend down our principal over time if we want a decent standard of living. What you don't want to do is drain your retirement funds too fast. Your initial withdrawal from your retirement funds shouldn't exceed 3% if you're in your 50s or 4% if you're in your 60s, according to studies by mutual fund company T. Rowe Price. The company's retirement income calculator can help you see whether your withdrawal rate is sustainable, given your investment mix.

3. You haven't road-tested your dreams. I recently encountered a couple who moved from California to a small city in Washington state. On paper, the community looked ideal: Housing was less expensive, good health care was accessible, and the area was loaded with golf courses (golf was a particular passion of this couple). But golfers in the Pacific Northwest have to like, or at least tolerate, playing in the rain, and this couple emphatically did not. In the abstract, they thought they could handle wet weather; in reality, it made them feel trapped.

Experts on relocation in retirement recommend spending a long vacation or two at your proposed destination to make sure it's a good fit. If you're planning to move to a different climate, try visiting in the most difficult season -- August in Arizona, for example, or December in Duluth, Minn. Road-testing your dream is also essential if you're contemplating a new career, such as running a bed-and-breakfast in retirement.

At the very least, you should talk to other people who have done what you want to do and "learn from them what it takes, the joys and difficulties, what it's like on a day-to-day basis," said financial planner Ed Jacobson, the author of "Appreciative Moments: Stories and Practices for Living and Working Appreciatively."

"It's always good to test one's dreams or fantasies," Jacobson said. "It's far better to benefit from the information, experience and acquired wisdom of those who have preceded us on the path we're contemplating in retirement."

Continued: Understanding Social Security

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Recent Articles by Liz Pulliam Weston

Discuss personal finance with Liz on the Your Money message board.

12/03/2010 4:14 PM

Get real and quit putting the blame on Obama. First of all a great many jobs went overseas because of NAFTA. As far as jobs are concerned, the Bush tax cuts DID NOT create jobs.Do u think a lawyer who makes 250K is going to go out business if he has to come up with 3% more fed tax. If his tax got lowered 3% he sure won't hire anyone. 

 How can someone think of retiring if he works for a

Small business making $10/hr with no health benefits.

     The Republicans obsess about tax cuts Hell, I'd give up 5% of my Social Security if $250K folks quit crying. They have so many tax breaks they rarely have their entire income taxed.

12/03/2010 1:37 PM
Yes, let's blame Obama, but who let the Wall street/banks/mortgage companies run wild. Oh, no healthcare!!
Having worked in the medical field for 24 years, what is cheaper?? letting CHIP do preventative care or use the ER as your doc?
Seems to me; most people complaining about Obamacare never had to worry about no health insurance. My wife who worked since she was 16 as LVN and RN; used ALL our 401K, annuity, savings to repair her knees.(We had health insurance!!) We paid off our house but cannot sell it in this economy. My wife and I are the first generation college graduates trying to find the American dream; live frugally, save, and thanks to greedy bankers, hedge fund managers, and "no new taxes"; trickle down economics did not work. Even GHW Bush said it is "voodoo" economics.
I am sick of ya'll complaining. Suck it up, pay your bills, drive a reasonable car, and quit complaining "we owe you".
A 60 year old teacher getting used to my school district cutting back more and more to educate our future.
No I am not a flaming socialist/Democrat/Tea party hater.

11/06/2010 2:24 PM
Another great option is: Infinite Banking by Nelson Nash. 

11/05/2010 12:21 PM

When my mother had a stroke I had to put her in a nursing home. The government went after their home to pay for the nursing home fees of $4,000.00 a month, money neither my parents nor the kids had. Even though we were willing to sell the house we were able to keep it  from being taken away  because my 84 years old father was living in it.

I think the best thing to do is to sell your home while you have some health left and buy another one only using a small down payment. Your kids then, will have some money to inherit.

11/04/2010 6:32 PM
MMMMM??Dow over 11,000, out of Iraq, banks paid back their money.  Yeah I want Bush back.  Be careful what you wish for with this mid term swing.  Back to borrowing and spending, borrowing and spending. 
11/04/2010 2:46 PM
11/04/2010 11:45 AM

After Obama is finshed ... nobody will be able to retire ...

No Work, No Jobs, No Money, No Social Security, NOBAMA ...

Hopefully this disaster will be limited to only ONE TERM.

Ummmm, President Obama has been in office for precisely 2 years.  That is hardly time to have destroyed the opportunity to work, the future of Social Security, etc.  The problems we have now are a direct result of 8 years of Republicans looting the country.


Since Obama has been elected, the economy has stopped its downward spiral, employment has slightly improved, we got more money back from the banking industry than we had to plow into it (that's called "investing in America" and was started by Bush II), etc.


The problem with Americans like our friend Pontifex is that they either have very short attention spans and cannot connect causes to results, or they are (possibly like our friend Pontifex) getting into threads like this and spreading lies so as to get the very stupid people who have short attention spans to link a bogus cause to an effect.


The question, then, is whether Pontifex is stupid or venal.  Republicans spent money like drunken sailors without taxing all the while they claimed the Democrats would tax and spend.  Well, yes, wealthy Americans love the idea of getting something for nothing--so they loved the Republicans.  Now, they blame the Democrats for expecting them to actually pay for the things they received.


Old Americans, particularly, are ticked off.  Twelve or sixteen more years of a Republican administration giving them benefits blithely, and they will be dead and never have to pay for it.  Of course, if they keep raising the retirement age (which is a Republican idea) and dismantle the health care package, none of the rest of us will get the benefits anyway  because we will die first, too.


This, apparently, is the Republican plan.  Work until you die and never draw benefits, or if you are already on benefits, die before you are impacted by the results of overspending on the elderly.  So, the elderly will die voting Republican and stop drawing money, the middle class will die before they draw benefits--and so few people will be on benefits that they can be eliminated, cancelling out the need to fund a program that they completely drained.


Well, it's a plan.  I guess we should be glad that they have one.

11/04/2010 11:37 AM
This is a good article, however, it most likely will not be read by the right people.  The time to become informed is when you're in your 20s and 30s.  Most in that age group don't care about retirement because they're too busy raising kids.  My advice to anyone in that category reading this is to SAVE, SAVE, SAVE!  Regardless of your employment, regardless of your pension/401K/retirem​ent, SAVE!  Do the math.  There's always a need for more in 30 years.  Preach to your kids when they're first married or going out on their own.
Some of you need to get a life.  Doom and Gloom seems to be the daily outlook for you.  Maybe if you planned on having a retirement about 40 years ago you would be in a better situation.  I spent 26 years in the military.  Great retirement pay.  Then I worked for the government another 15 years.  Another great retirement, plus a government protected 401K.  Then add SS.  I don't think I have to worry too much unless the doom and gloom people get in charge.
11/04/2010 11:21 AM

After Obama is finshed ... nobody will be able to retire ...

No Work, No Jobs, No Money, No Social Security, NOBAMA ...

Hopefully this disaster will be limited to only ONE TERM.  

11/04/2010 11:10 AM

1.You can't retire when you have a post-graduate education and can't buy a job that pays more than 9/hr because the economy sucks and isn't getting better. 

2.You'll never retire because on those wages you'll be lucky to make the rent while working, there is no saving, no vacations, and if you're responsible - no children (can't afford them). 

3.You know that your parents had it better than you and any children you'd have would be worse off because the country is going down the toilet no matter if it's Rs or Ds in control.  Both suck just different sets of private equipment.

4.You're terrified of getting old because you know the time will come nobody will hire you, and there won't be any SS left since the prior generation and administrations stole all the money you put in over the decades.

5.Retirement is what our parents and grandparents were able to do.  A thing of the past for most middle-class Americans of my and future generations.


Welcome to my America.

11/04/2010 11:06 AM
To: Ih8rGovernment--simple solution, move out of the US.  I'm sure you'll find it much easier to retire in another country.
9. You're still supporting your kids. Some of the saddest e-mails I get are from parents whose adult children have sucked them dry financially. The parents either can't retire or have run out of cash to live on because of their endless demands for money -- and the parents' inability to say no.

There are actually two different types of this. One, a child lives with their parents, works for what they want, and asks for little, yet doesn't move out either because they don't have any friends, or their job really isn't steady enough to support that.  Seriously, it would be kinda cruel to just throw that kinda person on the street, though it would definitely be good for them to find a better job and build a support network of friends.


Then there is the type of kid who lazes on the couch, asks for allowances they didn't earn so they can buy the latest iPhone, and doesn't stay because they want to be with their parents but so they can eventually get some kinda inheritance.


Do you see the difference?



11/04/2010 10:53 AM
11/04/2010 10:49 AM
Yep, it's a good article, but I do plan to live on my earnings to protect my principal.  I'm also delaying my retirement.  I'm 54 and could retire today, but I'll delay until I'm 60 or so to pad my principal.

I don't agree with these 10 signs. I have my own 5 signs that tell me that i'm not ready to retire.


1. Living in America

2. Making less than 1 million $ a year

3. The Federal government exists

4. Investing in a 401K where Wall Street thugs can steal it

5. Banking Institutions exists

11/04/2010 9:22 AM

Liz always has GOOD articles.......

11/04/2010 9:10 AM
I'm less than 1/2 the age of 'retirement status' in the company I work for to get full pension. I began a 401K and pray that in the end it will be worth it. I'm smart enough to realize that the 'Baby Boomer' generation will suck SS completely dry and my husband and I WILL be completely on our own. Will we ever be able to retire? Probably won't know until we're pushing 70-something. Will our mortgage be paid off? H3LL yes! Is a home an investment? Maybe 60yrs ago... Not now or will it be again.
11/04/2010 8:42 AM
Having to start using your principle earlier than you want is almost guaranteed: the SSA is now projecting NO COLA through 2018 and it could go longer! Ouch! I'm going back to work.
11/04/2010 6:58 AM
Means testing is complicated but necessary.  Take a triple dipper like me. Disability pension from SS for 20 years so far. And 2 pensions from the corporate world. I am a multi millionaire. I don't need social security - I donate it to charity.

  How about a 62 year old SS recipient who has a 2 year old child and whose much younger spouse is making + $200K annually. The  62 year receives  an additional $1000 pm for the child until the child turns 18!   
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