Are You Financially Ready to Retire?

My honest answer is always the same: It depends. It depends on how much you plan to spend, how much reliable income you have, and whether your savings are large enough to cover the gap between the two — year after year, for the rest of your life.

Retirement readiness isn’t a feeling. It isn’t a number your neighbor mentioned over the fence. It’s a structured assessment of three specific variables — and if you haven’t worked through all three, you may be making one of the most important decisions of your life on incomplete information.

Here is the framework I use with clients at Fintegrity®, distilled into three straightforward steps.

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Step 1: Know What You’ll Spend

Most people underestimate this step because they assume their spending will drop in retirement. Sometimes it does — and sometimes it doesn’t.

Start with your current annual spending. Pull 12 months of bank and credit card statements and add up every payment. Don’t just average your utility bills — account for irregular expenses like annual property taxes, insurance premiums, and home repairs. Those are real costs that belong in your retirement budget.

Then adjust for what retirement actually looks like for you:

• Will you travel more in the early years?
• Will housing costs change if you downsize, relocate, or pay off your mortgage?
• How will healthcare costs shift when you move off employer coverage to Medicare and supplemental insurance?

The goal is a realistic, category-by-category estimate of your annual cost of living in retirement. For many of my clients, that number lands somewhere around $120,000 per year — but it varies enormously depending on lifestyle, location, and family obligations.

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Step 2: Know What You’ll Earn

Retirement income is not just Social Security — though that’s an important piece. It also includes interest and dividends from your investment portfolio, pension income if you’re fortunate enough to have one, and potentially part-time compensation, consulting fees, board service, trust distributions, or rental income.

Add all of those sources together to get your total pre-tax retirement income. Then subtract income taxes — because what matters is the after-tax amount available to spend, not the gross figure. Your tax obligation will vary based on your filing status, income composition, and the state where you live.

One note on Social Security: do not guess at your benefit. Log in to SSA.gov and look up your actual projected amount at different claiming ages. The difference between claiming at 62 versus 70 can be substantial — and the optimal strategy depends on your health, your spouse’s situation, and your other income sources.

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Step 3: Calculate the Gap — and Whether Your Savings Can Cover It

This is the core of the analysis. Subtract your after-tax income (Step 2) from your estimated annual spending (Step 1). The difference is your annual withdrawal gap — the amount you need to pull from savings each year to maintain your lifestyle.

For example: if you plan to spend $120,000 per year and your after-tax income from all sources totals $70,000, your gap is $50,000.

Now apply the 4% withdrawal rule — a widely cited guideline suggesting that withdrawing roughly 4% of savings in the first year of retirement, then adjusting for inflation, has historically supported a 25–30 year retirement for a diversified portfolio invested 60% in stocks and 40% in bonds. Under this framework, multiply your annual gap by 25 to estimate the savings you need.

In our example: $50,000 × 25 = $1.25 million in after-tax savings required.

A few important caveats:

• If your savings are primarily in pre-tax accounts (traditional IRAs, 401(k)s), you’ll need to withdraw more than you plan to spend to cover the taxes owed — which means you need a larger pool of pre-tax savings to generate the same after-tax spending power.
• If you expect a longer retirement — 35 or 40 years — a more conservative withdrawal rate may be appropriate.
• If markets underperform during your early retirement years, sequence-of-returns risk can significantly erode your portfolio. This is where investment strategy and asset allocation become critical.

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What Your Result Means

If your analysis shows a surplus — your savings appear sufficient — you may be on track. You can consider retiring as planned, increasing your planned spending, or directing more resources toward family or charitable goals.

If your analysis shows a deficit, you have real options: reduce planned spending, delay retirement by a year or two, increase your savings rate while still working, or recalibrate your investment strategy to improve expected returns without taking on imprudent risk.

Either way, a back-of-the-envelope calculation is only a starting point. The variables that truly determine retirement security — sequence of returns, tax efficiency, healthcare costs, longevity, Social Security optimization, estate planning — require a more detailed and personalized analysis.

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The Bottom Line

Answering “Am I ready to retire?” requires more than a gut check. It requires a disciplined look at your spending, your income, and your savings — and an honest assessment of whether those three things line up.

I work with individuals and families navigating exactly this question. If you’d like to work through this analysis together — accounting for your specific time horizon, tax profile, risk tolerance, and family circumstances — I’d welcome the conversation.

Fintegrity® LLC provides comprehensive financial planning and discretionary portfolio management for individuals and families investing $2 million or more throughout the US. Based in Tenafly, NJ. Rated 5 stars on Google.

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The content of this article is for informational purposes only and does not constitute personalized financial, tax, or investment advice. Investing involves risk, including the possible loss of principal. Consult a qualified financial adviser before making retirement planning decisions.