How do I know when I can afford to retire?
David TalleyUpdated December 15, 2025
Quick Answer
You can typically retire when your savings, Social Security, and other income sources can sustain your desired lifestyle for 30+ years. A common rule of thumb is the 4% rule—if 4% of your portfolio plus other income covers your expenses, you may be ready. However, retirement readiness depends on your specific expenses, healthcare needs, and goals.
This is the question that keeps most pre-retirees up at night. Let me break down how we actually think about it.
The basic math:
Add up your expected annual expenses in retirement. Include everything—housing, healthcare, travel, hobbies, helping family. Then compare that to your income sources:
- Social Security (estimate at ssa.gov)
- Pension income (if any)
- Rental income or other passive sources
- Sustainable withdrawals from your portfolio
The 4% rule:
A commonly cited guideline suggests you can withdraw 4% of your portfolio in year one, then adjust for inflation each year. So $1 million = roughly $40,000/year. This isn't perfect, but it's a starting point.
What the 4% rule misses:
- It assumes a 30-year retirement. If you retire at 55, you might need 40 years.
- It doesn't account for sequence of returns risk—bad markets early in retirement hurt more.
- Healthcare costs before Medicare can be significant.
- Your spending won't be constant—most people spend more early in retirement, less later, then more again for healthcare.
The real answer:
Retirement readiness isn't just about hitting a number. It's about:
- Having a clear picture of your expenses
- Understanding your income sources
- Building in buffers for healthcare and emergencies
- Testing your assumptions with realistic projections
This is exactly the kind of clarity we help clients build. The goal isn't just to retire—it's to retire confidently.
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