Can You Afford to Retire? How to Know if You’re Financially Ready

A retirement plan involves more than investments alone.
Let's talk about how the different pieces of your retirement plan can work together.

Key Takeaways:

It starts with two numbers: what you'll spend and what you'll have. Whether you can retire comes down to whether your income and savings can cover the life you're picturing once the paychecks stop.
Healthcare, taxes, and inflation can shrink a plan that looks great on paper. Pull those costs in early and you'll see what your money can really support.
A strong plan holds up even when things go sideways. We pressure-test a longer life, weaker markets, higher costs, and less income to see how much room your plan really has.

After decades of saving, hitting a certain number in your accounts can feel like the finish line. But whether you can actually retire comes down to something more specific: whether that money can cover the life you want to live.

Social Security only replaces about 40% of the average worker’s pre-retirement income, so most of what you’ll live on will likely come from your own savings and other income.¹ That’s why a proper readiness check looks at everything together: your spending, your income, your investable assets, taxes, healthcare, inflation, and how long it all has to last.

Start With What You'll Spend and What You'll Have

Begin with the retirement you’re picturing and the resources you’ve got to fund it. Generic retirement savings goals are a useful gut check, but your own spending, assets, and target retirement age are what actually matter here.

Look at both sides together. Your spending sets the demand on the plan, while your income and investable assets show what’s there to meet it once your paycheck changes or stops.

Conducting a Comprehensive Financial Health Assessment

Conducting a comprehensive financial health assessment is an essential step in assessing your retirement readiness. It involves evaluating various aspects of your financial situation and setting realistic goals for retirement. By conducting this assessment, you can gain a better understanding of your current financial health and make informed decisions to improve your retirement prospects.

1. Evaluating Your Current Financial Situation is a crucial part of assessing your retirement health. It involves reviewing your income, expenses, assets, and debts to gain a clear understanding of your overall financial position. Seeking the guidance of a financial advisor can be beneficial during this evaluation process, as they can provide expert advice and help you analyze your financial situation. During the evaluation, it is important to gather relevant personal information, such as income statements, bank statements, and investment account statements. This information will help you assess your current financial health and identify areas for improvement. By evaluating your current financial situation, you can determine whether you are on track to meet your retirement goals and make any necessary adjustments to improve your financial health. It also provides an opportunity to identify potential risks or gaps in your financial plan and take appropriate actions to mitigate them.

2. Setting Realistic Retirement Goals is vital for creating a solid financial foundation for retirement. It involves determining how much money you will need to live comfortably during your retirement years and developing a plan to achieve those goals. A retirement plan serves as a roadmap for achieving your financial goals and can help you stay on track throughout your working years. To set realistic retirement goals, it is helpful to use retirement calculators, which take into account various factors such as your current age, desired retirement age, expected income, and expected expenses. These calculators can provide you with an estimate of how much you need to save and how much you can expect to receive in retirement income. By setting realistic retirement goals, you can develop a comprehensive strategy for saving and investing and make informed decisions about your financial future. Regularly reviewing and adjusting your goals as needed will ensure that you stay on track towards a secure and fulfilling retirement.

Nail Down What Retirement Will Actually Cost You

A realistic baseline starts with what actually leaves your accounts each month. To build one, separate your steady costs from your lifestyle choices and occasional big expenses, so the picture reflects how you really plan to live.

Build it from the spending you expect to carry into retirement:

Add up the recurring stuff: Housing, utilities, food, transportation, insurance, property taxes, upkeep, and the subscriptions that keep renewing.
Layer in the fun: Travel, hobbies, dining out, gifts, and giving, the things that make retirement feel like retirement.
Don't forget the lumpy costs: A new car, a roof, a big trip, or helping family; then decide which ones need money set aside.
Adjust for what changes: Commuting and payroll deductions may disappear, while some lifestyle spending may climb once you have the time to enjoy it.
Separate your fixed costs from the discretionary ones; because that's where your flexibility lives if things ever get tight.

Take Inventory of What You're Bringing In

Next, figure out what’s coming in and when. This is where you separate steady income, the assets you can actually invest and spend, and the wealth that’s locked up unless you sell or borrow against it.

Your inventory should capture the big sources that can support retirement:

Social Security: Check your expected Social Security benefits and your claiming options. Your benefit amount shifts depending on when you claim relative to your full retirement age, which is based on your birth year.2
Pensions or annuities: Write down the amounts, start dates, survivor provisions, and any inflation adjustment, so the plan reflects the actual terms.
Other steady income: Rental income, a business, consulting, part-time work, or a spouse's earnings, if they're reasonably dependable. Flag which ones might wobble.
Investable assets: List your 401(k), other workplace plans, traditional and Roth IRAs, taxable accounts, HSAs, and cash. This is the money actually available to spend.
Accessible vs. locked-up wealth: Keep your investable assets separate from your home, business, or other real estate that only helps if you sell or borrow. If you're planning to tap it, say so up front.

Watch for the Costs That Make Retirement Look Cheaper Than It Is

Your first pass can look downright comfortable when the future costs are understated. A strong plan accounts for expenses that arise or grow after work ends, before you count on that comfortable number.

Healthcare, taxes, and inflation each hit a different part of the equation. Together, they decide how much of your income and savings you actually get to spend.

Plan for Healthcare, Before and After 65

If you retire before you’re eligible for Medicare, you’ll need to bridge the gap when your employer coverage ends. A spouse’s plan, COBRA, Marketplace coverage, or retiree coverage can all fill it, at a cost worth knowing in advance.

Medicare generally starts at 65 for people who qualify, so your plan should account for any coverage gap before that point.³

Even after Medicare kicks in, premiums, deductibles, copays, and drug coverage still add up, and dental, vision, and hearing can vary by plan.⁴ Because medical costs tend to climb later in life, it’s worth treating them as their own line rather than folding them into your working-years budget.

Factor In Taxes and Inflation

Your gross retirement income and your after-tax spending money aren’t the same thing. Traditional IRA withdrawals are generally taxable, while qualified Roth withdrawals can come out tax-free, so where your money sits changes how far it goes.⁵

Inflation is the other slow pressure. If your costs creep up year after year, a plan built on today’s prices gradually loses ground, even if the starting numbers look fine.

To keep the plan honest, compare your future spending to your rough after-tax resources using realistic inflation assumptions. That keeps the whole thing tied to your goals.

Stress-Test Whether Your Plan Holds Up

Once your baseline is realistic, see how it behaves when life doesn’t cooperate. This is where you find out whether your plan has enough margin to carry you through a long, secure retirement.

A few pressure points are worth testing:

A longer life than you expect: The average 65-year-old today lives into their mid-80s, and about 1 in 4 will pass 90.6 Stretch your timeline out, because planning to a ripe old age is a lot safer than hoping you won't need to.
A rough start in the markets: Model a downturn right around your retirement date and watch what withdrawals do to the portfolio. Early losses hurt far more than later ones.
Higher costs than planned: Nudge up your household, medical, or lifestyle numbers to see how much pressure the plan can absorb, especially if there's little discretionary wiggle room.
Less income than expected: Trim a variable income source, or assume one spouse stops working sooner, and see how much margin is left.
Your built-in flexibility: Look at what you could adjust if you had to: discretionary spending, work plans, or housing. If you've got several realistic levers, that's a good sign.
How long your money lasts: Check how long your retirement savings may last under reasonable assumptions, so one rosy projection doesn't lull you into a false sense of security.

Please Note: Our financial calculators can give you supporting estimates based on your numbers. Use them as a single input in the broader readiness picture rather than as a personalized retirement decision.

Getting Financially Ready for Retirement FAQs

1. Is there a magic number that means I can afford to retire?

Not really. Whether you’re ready depends on how your resources stack up against your spending over time, plus taxes, medical costs, longevity, dependable income, and how much flexibility you’ve built in.

2. What expenses should I include when I check my readiness?

Your recurring costs, discretionary spending, and the occasional big purchase, plus taxes, medical spending, inflation, and any debt payments that follow you into retirement.

3. How do Social Security and a pension affect whether I’m ready?

They lighten the load on your portfolio by providing steady income. Look at their start dates, survivor provisions, and reliability alongside your spending and investable assets.

4. How should healthcare costs affect my retirement date?

A lot, sometimes. Coverage costs can decide when leaving work is affordable, so compare your options at your target age and include both premiums and expected out-of-pocket spending.

5. How do taxes change what I can actually spend?

Different accounts get taxed differently, so your gross balance can overstate what’s really spendable. Estimating your after-tax cash flow gives you a truer sense of readiness.

6. How do inflation and longevity fit into a readiness check?

Bump future spending up for inflation and test a longer life than your best guess. Both show whether your money can carry you through early and late retirement.

7. Can a retirement calculator tell me if I’m ready?

It can estimate the pieces, and Goldstone’s financial calculators are a good place to start. A full readiness check connects those estimates to your spending, taxes, medical costs, assets, and how long everything needs to last.

Get Help Figuring Out Whether You Can Afford to Retire

Knowing whether you can afford to retire takes one connected view. Your spending, income, assets, taxes, medical costs, inflation, and flexibility all have to line up to show whether your money can support the retirement you want.

Our team can pull those pieces together, compare a few possible retirement dates, and test different what-ifs. From there, we’ll show you where your plan looks strong and where a little more prep could boost your confidence.

That kind of clarity makes the retirement decision a lot less nerve-wracking. To talk through the trade-offs together, with our team.

Resources:

1) Social Security Administration: Understanding the Benefits

2) Social Security Administration: Full Retirement Age

3) Medicare.gov: Get Started With Medicare

4) Medicare.gov: Parts of Medicare

5) IRS: Traditional and Roth IRAs

6) Social Security Administration: Period Life Table

Disclaimer:

Goldstone Financial Group, LLC (“GFG”) is a registered investment advisor with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or qualification. This material is provided for informational purposes only. Opinions expressed herein are solely those of GFG. None of the information presented in this material is intended to offer personalized investment advice and does not constitute an offer to sell or solicit any offer to buy a security or any insurance product and is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation.

Conclusion

In conclusion, retirement planning is crucial for securing your financial future. Assessing your current financial health, setting realistic goals, and optimizing your investment strategy are key steps to ensure a comfortable retirement. Adequate insurance coverage and planning for long-term care are also important aspects to consider. Understanding healthcare costs in retirement, especially Medicare and supplemental insurance, is vital for budgeting effectively. By evaluating your retirement savings, projecting expenses, and considering tax-efficient withdrawal strategies, you can achieve financial readiness for your golden years. Start prioritizing your retirement health today for a stress-free future.