In my previous post entitled Retiring While Black, I shared how Black people fare in terms of retirement readiness. I revealed, although no surprise, that Black people face more obstacles than white people when it comes to retirement readiness and retiring without debt. In this post, I want to discuss how to retire not in the red, but in the black!
Will you still be in debt and in the red? Or will your outstanding bills be paid off and you retire in the black? Many decisions made over the course of a lifetime will determine how you navigate your way to a financially secure retirement.
When Do You Know It’s Time to Retire?
The truth is, it can be difficult to figure out when you are truly ready to retire. Some people aim for a certain retirement age, perhaps 62 or 65, while others set a financial goal, such as $1 million in a retirement account. Unfortunately, that’s not me!
Besides retiring while Black, there are signs and targets that can signal that you are prepared to retire, but they’re not all about your age and how much money you’ve saved. Through my research for this post, I’ve learned how to tell if you are ready to retire.
You Are Financially Prepared
You should have a handle on what your costs will be in retirement and where you will get income to cover those expenses. You need to know what your savings, pensions, Social Security, and other assets can generate in income, and if this income will meet your retirement needs.
You Have Eliminated Debt
Having low or no debt allows you to use your savings and retirement income for current expenses.
You Have a Plan to Cope with Emergencies
While it’s essential to have a plan to cover everyday bills, you will also need strategies to manage emergency expenses in retirement.
You Have a Social Network
Your job often becomes a part of your identity. If you socialize primarily with people you work with, you will need to form a new community. When you are near retirement, you have to come to the realization that this social side of going to work is coming to an end.
You Have Something Else to Do
When you’re ready to retire is, first, an emotional decision. Secondly, it’s a psychological decision. Finally, it’s a financial decision. It can be helpful to practice retirement and start taking on new activities that interest you. Figure out what you want, and picture what your retirement should look like.
Start Saving Yesterday
It’s never too early to plan for retirement no matter who or what you are. As I stated earlier, I began my career as a public service-sector employee 43 years ago at age 20. Yes, I was paying into social security and pension, and at that time, retirement was the last thing on my mind. Older workers would tell me about the city’s Deferred Compensation Plan (DCP) as an extra retirement investment. I wish I knew then what I know now.
Much later in my career, I enrolled in the DCP and the money looked good. However, I could only imagine what those extra dollars would have looked like had I started saving over 30 years ago! I would have done a lot more with my money, but I wasn’t focused early enough. I lacked the financial knowledge that I believed is prevalent in Black families that have been denied opportunities to build wealth.
You can turn things around for when you’re ready to leave the work world; you can live comfortably. Don’t do like I did. If you’re able to, take advantage of a DCP or 401k. These give workers a way to save money pretax through payroll deductions. When deductions are taken out, you don’t have to worry about it.
An important goal for saving early for retirement is to make sure you wouldn’t outlive your savings!
Although it would be to my advantage to wait until I’m 67 to apply for social security, my plan is to apply once I retire at 63 and use part of my DCP to help pay off my student loans. If you can wait until 67 or 70 to claim Social Security benefits, you may be more secure in easing into retirement with that, plus your pension and retirement fund.
While it’s true that many Black people and others haven’t traditionally sought professional financial advice because of lack of awareness, it can pay to get good guidance to work on long-term wealth-building goals. But to redefine your own retirement, the first step is to know what your opportunities may be and to start preparing sooner than later. Believe me, it will pay off in the long run. Even with all the disparities, there are still plenty of Black Americans who are retired and enjoying their life. I’m professing that this will be me! It all comes down to proper planning, setting goals and being realistic about what you are trying to achieve. All in all, make the choice that’s best for you! Just remember, if you are strategic in retirement planning, you can avoid being in the “red” and retire in the “black.”