Can I Retire Yet? A Practical Approach to Deciding
A Straightforward Starting Point for a Life-Changing Decision
After working with hundreds of clients over the years, I’ve found one question consistently rises to the surface:
“How do I know if I can afford to retire?”
It’s one of the most important financial questions any of us will face. But most people don’t want to start with a 30-tab spreadsheet. They want to fire from the hip—to quickly get a ballpark sense of where they stand. That’s where a “back-of-the-napkin” approach can be helpful. Recently, I had the opportunity to share my thoughts on this very approach in a feature by ComparisonAdvisor, where I discussed how to use a quick “back-of-the-napkin” estimate to assess retirement readiness — and why it’s only the first step toward a confident plan.
And once you’ve run that quick math, it opens the door to deeper, more strategic planning. That’s what this blog is all about—giving you the tools to run your own initial assessment, while showing you the real value of planning beyond the napkin.
This post explores how to calculate your retirement readiness with simple tools, why that approach has real value, and where it falls short. Then we’ll walk through what a full plan should look like so you can confidently answer, “Am I ready to retire?”
Step One: Estimate How Much Income You Need in Retirement
Let’s begin with a basic rule of thumb: most retirees will need 70% to 80% of their current gross income to maintain their standard of living in retirement.
Why not 100%? Because once you retire, you’re no longer:
- Contributing to a 401(k) or IRA (typically 8–10% of income)
- Paying payroll taxes (7.65%–8.55%)
- Making HSA contributions
- Paying for work-related expenses or employer group benefits like life or disability insurance
Here’s a simple breakdown:
Current income: $120,000
70% of income: $84,000
80% of income: $96,000
Use the lower end of the range if you’ve paid off your mortgage, plan to spend less, or live a relatively simple life. Use the higher end if you want to travel, support family, or increase your lifestyle in retirement.
These are just starting points—but they give you the framework for understanding how much income you’ll need to generate from other sources once work stops. Retirement is about cash flow, not account size.
Step Two: Calculate What Your Portfolio Can Sustainably Provide
Once you know what you need, you need to know what your portfolio can provide.
A common benchmark is the 4% Rule—a guideline suggesting that withdrawing 4% of your retirement portfolio annually gives you a good chance of not running out of money over a 30-year retirement.
That said, in my real-world experience—working with legacy retirement planning practices that have seen clients successfully retire over multiple decades—I’ve found that 5% is often still a realistic and sustainable rate, especially when:
- Portfolios are diversified and monitored
- Clients are flexible with spending in bad market years
- Plans are revisited annually and adjusted accordingly
Here’s the napkin math:
- Portfolio value: $1.2 million
- 5% withdrawal rate: $60,000
- Add Social Security: $30,000
- Add rental income/pension: $10,000
- Total annual income: $100,000
If you’re targeting $90,000 and this back-of-the-napkin math gets you to $100,000—you’re in the ballpark.
But don’t stop there.
Understand the Psychological Side of Retirement Readiness
Retirement planning isn’t just about numbers. It’s about how those numbers make you feel. I’ve had clients with millions saved who still felt nervous. Others with modest assets who retired confidently because they understood their plan and spending needs.
Confidence in retirement is as much emotional as it is financial. That’s why you need more than a napkin—you need a roadmap that evolves as life does.
Some questions to ask:
- Are you someone who needs constant certainty to feel safe?
- Do you plan to keep working part-time or consulting?
- Would you rather underspend and leave a large legacy, or enjoy every dollar?
Your answers impact everything—from portfolio construction to withdrawal strategy.
Five Reasons the Napkin Isn’t Enough to Retire Confidently
That math might feel good. It might even be accurate. But don’t mistake a rough sketch for a blueprint. Here’s why the napkin method falls short:
1. Spending Is Not Static
Retirees don’t spend the same amount each year. You might travel more in your early years, slow down later, and then face healthcare expenses later on. Retirement is dynamic.
Spending spikes and dips. A strong financial plan accounts for lifestyle-driven and age-driven changes.
2. Sequence of Returns Risk
If markets fall early in your retirement and you continue withdrawing at a fixed rate, you risk depleting your portfolio too fast. Even if average returns recover, your portfolio may not.
This is called sequence risk—and it’s one of the most dangerous but least understood threats to retirement security.
3. Longevity Risk
You don’t know how long you’ll live. Planning to 90 might be safe for some—but many people live well into their 90s. And if one spouse lives longer than the other, it could dramatically affect housing, healthcare, and income needs.
Your plan needs to work for the long tail of life.
4. Taxes Can Derail the Plan
Many retirees think their tax bill drops off in retirement. But when you start pulling from pre-tax accounts (like a 401(k) or traditional IRA), your taxable income may keep you in the same bracket—or even bump you higher.
A smart retirement plan includes tax-smart income sourcing and Roth conversion strategies, not just expense tracking.
5. Not All Income Is Equal
Withdrawals from different accounts are taxed differently. Investment volatility affects growth unevenly. Without a withdrawal strategy, retirees may unknowingly pull from the wrong source at the wrong time.
What a Full Retirement Plan Actually Does
The real benefit of a comprehensive financial plan is flexibility plus clarity. It’s not just a forecast—it’s a way to adjust in real time and make better decisions with confidence.
A strong retirement plan:
- Forecasts various retirement spending patterns
- Models the tax impact of your income sources
- Tests different withdrawal strategies across good and bad markets
- Accounts for inflation, healthcare, and legacy goals
- Shows how short-term decisions affect long-term outcomes
- Considers the emotional side of spending and lifestyle flexibility
And just as important—it’s updated annually so you can course correct when needed.
Retirement Confidence Comes From Preparedness, Not Guesswork
Even the most accurate math doesn’t ease worry. But when you’ve tested your plan against volatility, longevity, inflation, and taxes—and you know it holds up—you can:
- Spend with clarity instead of guilt
- Feel secure even when markets dip
- Say “yes” to travel, giving, or upgrades without second-guessing
Think of retirement like a road trip. If all you have is a gas gauge and a destination, you’ll drive with uncertainty. But if you have a full GPS, updated weather data, fuel stops mapped out, and alternative routes planned, you drive confidently.
That’s the power of a good plan.
Run Your Own Numbers—Then Let’s Build the Full Picture
If you’re wondering where you stand right now, that napkin math we discussed can be a powerful starting point.
To help you take the next step, we’ve created a Retirement Readiness Worksheet you can fill out at home. It’s free, easy to follow, and gives you a first-glance estimate of whether your income might support your retirement lifestyle.
📥 Contact us through the website here to get your copy
Once you’ve done that quick self-check, let’s talk about building the full plan—one that’s rooted in your goals, protected against risk, and designed to last decades.
Because retirement isn’t something to guess your way through. It’s something to prepare for with clarity and confidence.
