Have I Saved Enough? The Questions Behind Retirement Readiness.
For decades, the “4% Rule” has been quoted as a simple guide to retirement readiness: if you withdraw 4% of your savings in your first year of retirement, then adjust that amount annually for inflation, your nest egg should, in theory, last about 30 years. For example, a $2.5 million portfolio could support an initial withdrawal of $100,000, with future increases to keep pace with inflation. While a helpful starting point, the rule was built on historical averages and does not fully account for today’s longer lifespans, evolving tax rules, or unpredictable markets.
Retirement is not just about hitting a number; it is about aligning your resources with the life you want to live. Will you downsize, or perhaps upsize in a new community? Do you envision more travel, philanthropic giving, or helping the next generation? Many retirees are surprised to find their expenses rise rather than fall, especially when healthcare and lifestyle goals are factored in.
Equally important is understanding your income mix. Beyond your portfolio, Social Security, pensions, or rental income may provide steady cash flow. The gap between these income sources and your desired lifestyle will dictate how much savings you truly need, and the timing of withdrawals, tax strategy, and market cycles can significantly affect the outcome.
That’s why stress-testing your plan is essential. What happens if markets dip just as you retire, or if unexpected expenses arise? Exploring these scenarios can provide insight into potential challenges and help you make more informed decisions about sustaining your lifestyle in retirement.
While rules of thumb offer guidance, every household’s journey is unique. Thoughtful planning, often in partnership with a trusted advisor, can help you prepare for uncertainty and create a framework flexible enough to support the richer life you envision in retirement.
Eric Schaefer, CFP®, serves as Senior Wealth Advisor and Principal at Evermay Wealth Management. With more than 15 years of experience, Eric works with families, former uniformed officers, and pilots to navigate retirement and beyond. At Evermay, he and his colleagues craft personalized strategies that align wealth with life’s priorities.
Evermay Wealth Management, LLC, is a Registered Investment Adviser. Past performance is not an indication of future results. All investment strategies involve risk. The content is for informational and educational purposes only and should not be considered investment advice.