Here’s a quick way to tell if you’re ready to give up that monthly paycheck.
Spend six months living only on what you think you’ll have to spend in retirement and see how you do.
If you can manage to make ends meet on your retirement income only, bravo!
But if you run out of money by the 15th of every month, it may be time to go back to the drawing board.
You may need to consider postponing retirement, ramping up your savings, or making aggressive cuts in your post-retirement budget.
The Takeaway: Why is this such a good test? It’s not uncommon to see well-off people who spend $200,000 a year or more before retirement, but swear they can subsist on $60,000 a year once they quit working. The best way for them to see if they can really do it (or not) is to give it a try. For most people, it’s very hard to cut back in retirement without making substantial changes in where or how they live (like selling their home and downsizing, or moving to another state).