7 signs you might not have enough money to retire

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  • Retirement takes a lot of planning.
  • If you're still paying off debt and put off saving for retirement until later in life, retiring may be further away than you like.
  • You may also need to delay retirement if you're putting all your eggs in one basket - relying on just Social Security or an employer-sponsored retirement plan isn't enough; you need a diversified retirement portfolio, according to experts.

There are a few questions you should ask yourself before deciding if you're ready to retire.

One of those has to do with how much money you have saved. Even if you're emotionally ready to say goodbye to the 9-to-5 and know exactly what kind of lifestyle you want, the truth is that retirement isn't very feasible if your finances aren't in shape.

If you haven't saved enough money to get you through your golden years, you'll probably need to delay retiring.

Here are seven ways to tell you may not have enough money to retire.

1. You're not near your desired retirement savings goal

There's a simple way to calculate how much money you need to save to retire: Divide your desired retirement income by 4%.

For example, if your perfect retirement salary is $40,000, divide it by 4% and you get $1,000,000. If your perfect retirement salary is $80,000, divide it by 4% and you get $2,000,000.

If you have enough saved up, you should be able to withdraw 4% each year to pay for living expenses in retirement. Using the 4% withdrawal strategy requires earning at least a 5% investment return annually (after taxes and inflation) on your retirement savings, according to Business Insider's Lauren Lyons Cole, a CFP.

If your savings isn't close to what you need to live off your perfect retirement salary every year, you may have a way to go before retiring.

Read more: What to do in your 20s, 30s, 40s, and 50s to retire with $1 million, according to financial planners

2. You're still paying off debt

Not all debt is considered bad, but even good debt can turn bad if you've been making late or incomplete payments.

Financial experts typically advise prioritizing paying off high-interest debt. If you're still paying off a credit card bill or consumer loans with high interest, it's likely you're more focused on paying that off than saving for retirement.

"The more debt you carry into retirement, the more retirement income you'll need to pay off what you owe," wrote Cameron Huddleston of GOBankingRates. "When you're deciding when to retire, you need to figure out how long it will take to pay off your existing debts."

Scott Bishop, Director of Financial Planning at STA Wealth Advisors, told Huddleston you should pay off any high-interest debts that aren't tax-deductible first, such as credit-card balances. If you have good credit, refinance any high-interest debt that's tax-deductible, such as a mortgage, to get the lowest rate possible, he said.

But Debt.org advises saving for retirement before paying off debts if you're nearing retirement age and you have a relatively small debt or your employer offers to match your 401(k) contributions, reported Laura Woods of GOBankingRates.

3. You put off saving for retirement

When it comes to saving for retirement, it's better late than never. But saving early is the best thing you can do for your retirement account, thanks to the power of compound interest.

When you start saving, your original pot of money earns interest over time, creating more money in your account that accrues even more interest. The little bit of interest early on in the process can make a big difference.

For example, if a hypothetical person, Susan, invests $5,000 annually from age 25 to age 35 for a total of $50,000 assuming a 7% annual return, she'll have $562,683 saved by the time she retires at 65. If Bill invests $5,000 annually, but doesn't start until 35 and keeps it up until age 65, for a total of $150,000, he'll only have $505,365 saved by retirement.

"Whatever situation you're in, it's never too late to start growing, maximizing and safeguarding your retirement income - there are always things that can be done," Nigel Green, founder and chief executive of financial consultancy deVere Group, told MainStreet. "But the time to act is now as the longer you put off planning for your retirement, the harder it becomes."

Read more: A researcher who studied over 600 millionaires found they do 3 things to forge a clear path to financial independence

4. You're too dependent on Social Security

Social Security doesn't look as promising as it once did. The trust funds are projected to run out in 2033, in which case the retired would only receive "77% of its scheduled benefits," according to Daily Finance.

Social Security benefits represent around 38% of the elderly's income, with a $1,294 average monthly benefits, reported Woods. According to her, Social Security is an added benefit, not something to rely on.

5. You haven't been taking advantage of employer-sponsored retirement plans

Many employer-matching retirement programs, like 401(k)s, match up to 3% or 4% of each paycheck at 50% or 100% of the contributed amount, Thomas Walsh, an investment analyst with Palisades Hudson Financial Group in Atlanta, told reporter Jason Notte of MainStreet. But having a small amount taken out of your paycheck each month isn't the best way to achieve comfortable retirement.

"As your salary increases, try to maintain the same standard of living while increasing your retirement plan contributions," Walsh said. "Not only will the amount deducted from your paycheck escape income tax until retirement, the investments held in your account grow tax-free until the funds are later needed as well."

These tax savings can benefit from compounded growth, making a big difference in your future retirement income, according to Notte.

6. Your retirement portfolio isn't diversified

If you are taking advantage of employer-sponsored retirement plans, all the better, but you shouldn't put all your eggs in one basket.

"With the grim outlook on the future of Social Security and pension plans becoming a thing of history, relying on your employer's retirement plan to fund your golden years may just not be enough anymore," Walsh said. "Contributing to an employer plan such as a 401(k) is a great start for retirement saving, but the more you can save for the future, the better."

You should also be contributing to a private retirement plan like a traditional or Roth IRA, he said. If you're not, you may not be maximizing your retirement savings.

Your investment portfolio should include various asset types and be structured to outpace inflation, according to Bishop, with a mix of stocks to maintain growth and fixed income, such as bonds, to guard against market volatility.

Read more: Florida is one of the best places to retire in America - here's exactly how much it costs for a dream retirement in the Sunshine State

7. You've borrowed from your retirement savings

It's equally important to not dip into those retirement accounts early. According to Woods, an early withdrawal may be beneficial in the short-term, but it can hurt your long-term financial health. "You'll need to develop an aggressive savings strategy to try and get caught up again," she wrote.

Not only do early withdrawals from an IRA under age 59 1/2 put a dent in your retirement funds, they'll also incur a penalty and taxes. If you've already withdrawn, think twice before doing so again.

"If you need money, the last place you want to go for it is your IRA," Neal Frankie, a CFP, wrote for Business Insider.

"Once you start putting your fingers in that IRA cookie jar, you might be opening Pandora's Box. If you need the money for an investment, it might be investment you don't need to make," he wrote. "If you need the cash for an emergency, look for other options - any other option. But at the end of the day, if you do use your IRA money, please be aware of the tax consequences and the precedent you might be setting up."

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