We’re all looking forward to retiring eventually. But actually getting ready for retirement requires some work. Whether you’re planning ahead or almost at retirement age, you might wonder: when are you financially ready for retirement?

Don’t stress. We’ve got a general guideline that can help you gauge where you should be to comfortably retire:

• You’ve Paid Off Your Debt
• You Have Enough Savings
• You’re Prepared for Emergencies
• You Have a Budget in Place
• Your Credit Is in Good Shape

Let’s dive a little deeper.

How Do You Save Up for Retirement?

Enjoying a carefree retirement means that you’ll have to start saving up pretty early. Here are a few ways you can start saving.

401(k) plan: A 401(k) plan is a retirement plan that’s sponsored by your employer. You’ll be able to choose how much your salary goes into your 401(k), and your employer may match a percentage of your contributions. Not all employers offer 401(k) plans or match your contributions. In that case, you may want to consider an IRA as well.

Individual Retirement Account (IRA): With an IRA, you can stash as much as $6,000 per year for your retirement, or $7,000 per year if you are 50 or older in 2021. With a traditional IRA, you may get a tax break when you contribute, since your contributions may be tax-deductible. With a Roth IRA, you won’t get a tax deduction when you contribute but you also won’t be taxed when you withdraw that cash at retirement age.

You’re never too young to start getting ready for retirement! Even if you can only afford to put a small amount of your paycheck into your 401(k), it’s better than nothing. As you start earning more, you can contribute more toward your retirement funds.

In a saving mood?

How to Know You’re Ready for Retirement

If you’re nearing retirement age, you’re probably wondering when it’ll be the right time to retire. You certainly shouldn’t jump the gun—make sure you give your situation, both personal and financial, good consideration. Here are a few indications that you’re financially ready to retire.  

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1. You’ve Paid Off Your Debt

The last thing you want to do is go into your retirement when you still have debt to pay off. Outstanding debts will be tricky to pay off when you no longer have a regular income. Sure, you’ll have your savings, but you’ll want to use those toward your retirement lifestyle and expenses.

Are you a few years away from your ideal retirement age? Take a look at your debts. You might find that you have a bit more to pay off than you originally thought. If that’s the case, make a plan that’ll let you pay off your debts in a few years (if possible).

But if you’ve already paid off your debts, you can enjoy your retirement without any significant financial burdens. So take a good look at your debts before you make any decisions.

2. You Have Enough Savings

Let’s say you’ve been contributing to your 401(k) or IRA for quite some time now. How do you know if you have enough saved up? Experts say to save roughly 15% of your pre-tax income for retirement. That might work for some, but you need to consider your current age and when you’d like to retire before settling on a percentage to save up.

If you started your retirement savings in your mid-20s, continually saving 15% will probably give you a decent retirement fund. But if you’re starting a little later, you might want to consider saving up more. Only you can decide how much you should save for your retirement. If you need a little extra help, consider working with a retirement plan consultant.

3. You’re Covered if an Emergency Happens

It’s only natural—accidents happen. Unfortunately, it can be different to plan for unforeseen accidents or expenses. That’s why important, especially if you’re retired, to have a solid emergency fund in place.

Experts recommend calculating your total monthly expenses and multiplying it by how many months of emergency funds you want saved up. A quick example—if your totally monthly expenses will add up to around $5,000 and you want six months’ worth of savings, you’ll need around $30,000 saved up in your emergency fund.

4. You Have a Good Budget in Place

No matter where you are in life, we all should have a decent budget in place. Budgeting is a useful tool that will help you afford your lifestyle. But it can be especially important during your retirement.

When you’re not working, you no longer have that steady income. Instead, you’ll be on a fixed income. That’s absolutely nothing to panic about—it’s what you’ve been saving for! But it is something to keep in mind when planning your retirement budget. Take a look at your fixed income, fixed expenses, and variable expenses. From there, create a realistic and livable budget. Don’t forget to factor fun things into your budget, such as trips or bigger purchases!

5. Your Credit Is in Good Shape

The last thing you want to worry about during your golden years is your credit score. When you’re planning on retiring in the next few years, pay a little extra attention to your score. Make sure to pay your bills on time, dispute any inaccurate information on your report, and keep a good mix of accounts.

Need a little help keeping on top of your credit? Consider signing up for ExtraCredit! You’ll get access to five features that will not only give you insight into your score, but also shows where you stand in each of the main areas that make up your score.

Plan Carefully Before You Retire

Retirement is a huge step, so make sure you have everything in place that you need. But before you start planning, a quick reminder—everyone’s finances and financial goals are different. Evaluate your own finances before making any huge decisions.