How to Evaluate Your Retirement Readiness

28 February 2026

Retirement. That magical phase of life when alarm clocks become obsolete, emails don’t haunt your dreams, and pajamas become an all-day outfit choice. Sounds amazing, right? But hold on—before you start imagining endless beach vacations and golf afternoons, have you actually checked if you're financially ready?

Many people assume they’ll figure it out as they go. Spoiler alert: That’s a terrible strategy. If you don’t want to end up eating ramen noodles at 75 (unless that’s your thing), it's time for a serious retirement readiness check-up.

Let’s break it down, step by step, in a way that won’t make your brain melt.

1. Define Your Retirement Lifestyle

Before you can evaluate your readiness, you need to figure out what you're actually planning for. Do you dream of an early retirement, sipping cocktails on a tropical island? Or are you happy staying put, gardening, and spoiling your grandkids?

Think about:
- Where do you want to live? (Your current home, a downsized condo, or a beachfront shack?)
- What will your daily expenses look like? (Fancy dinners or homemade meals?)
- Will you travel often? (Backpacking across Europe or occasional road trips?)
- Do you plan on working part-time?

Get super specific. The more details you nail down, the more accurate your financial planning will be.

2. Calculate Your Retirement Number

Now that you know what retirement looks like, let’s talk numbers. How much do you actually need?

A simple rule of thumb is the 25x Rule:
- Estimate your annual retirement expenses.
- Multiply that number by 25.

For example, if you expect to spend $50,000 per year in retirement, you’d need around $1.25 million saved up.

Not into math? No worries—retirement calculators are your best friend. Plug in your details, and let the robots do the math.

3. Check Your Current Savings and Investments

Now, let’s see where you stand. Do you have:
- A 401(k) or IRA?
- Stocks, bonds, or mutual funds?
- Rental properties or other passive income sources?

If not, don’t panic. But if your retirement savings look more like pocket change than financial security, it's time for a reality check.

The earlier you start increasing contributions, the better. Compound interest is like a snowball rolling downhill—it gains momentum over time. So, start pushing that snowball ASAP.

4. Assess Your Income Streams

Relying solely on savings isn’t always the best strategy. You should have income coming in, even after you stop working.

Consider:
- Social Security – Will it be enough? (Hint: Probably not.)
- Pensions – If you’re lucky enough to have one, how much will you get?
- Part-Time Work – Consulting, freelancing, or even turning a hobby into a side hustle.
- Rental Income – Owning rental properties can be a steady source of cash flow.
- Dividend Stocks – Investments that pay you regularly without lifting a finger.

The goal is to have multiple streams of income to keep your finances steady.

5. Factor in Healthcare Costs

Newsflash: Healthcare in retirement is absurdly expensive. A healthy 65-year-old couple can expect to spend over $300,000 on medical expenses throughout retirement.

So, how do you handle this?
- Medicare – What will it cover, and what won’t it?
- Health Savings Accounts (HSAs) – If you have one, congrats! You’re ahead of the game.
- Long-Term Care Insurance – Nursing homes and assisted living aren’t cheap. Better to plan now than panic later.

The last thing you want is for medical bills to drain your retirement funds.

6. Consider Inflation and Taxes

If you think $1 million today is worth the same 20 years from now, think again. Inflation eats away at your money like termites in an old wooden cabin.

Likewise, Uncle Sam will still want a piece of your pie even after you retire. Some key things to check:
- Will your tax bracket change in retirement?
- Have you factored in Roth vs. Traditional IRA tax implications?
- How will withdrawals from your 401(k) or pension be taxed?

Keeping tax-smart strategies in mind can save you thousands.

7. Review and Reduce Debt

Retirement and debt don’t mix well. You don’t want to be making monthly payments on a mortgage or credit card when you’re supposed to be relaxing.

Here’s what to prioritize:
- Mortgage – Can you pay it off before retirement? Refinancing might help.
- Credit Cards – High-interest debt is a financial black hole. Pay it off ASAP!
- Student Loans – If you still have student debt, consider whether refinancing makes sense.

Aim to shed as much debt as possible so you can enjoy your retirement stress-free.

8. Stress-Test Your Retirement Plan

Alright, now that you have the numbers, it’s time for a test. What happens if:
- The stock market crashes?
- Unexpected medical expenses pop up?
- Inflation skyrockets?

A good retirement plan is flexible. If possible, simulate a retirement scenario for a few months—live on your expected budget and see how it feels. Adjust as needed before making the leap.

9. Create a Withdrawal Strategy

Once you’ve saved all that money, how do you actually use it? A bad withdrawal strategy can leave you broke way too soon.

The 4% Rule is a classic guideline:
- Withdraw 4% of your retirement savings annually.
- Adjust for inflation each year.

But this isn’t a one-size-fits-all approach. Maybe you need to tweak it based on your investments, income sources, and expected longevity.

10. Establish an Estate Plan

You may not want to think about it, but having a plan for your assets after you're gone is crucial.

Consider:
- A Will – Decide who gets what.
- Trusts – Helps in reducing estate taxes.
- Beneficiaries – Make sure your retirement accounts go to the right people.
- Power of Attorney – Someone to make decisions if you can't.

It’s not exactly the most exciting topic, but better to be prepared than leave behind financial chaos for your loved ones.

Final Thoughts

Retirement readiness isn’t just about a fat savings account—it’s about crafting a strategy that lets you enjoy life without financial stress.

If your numbers aren’t where they need to be, don't panic. You can always adjust your savings, cut unnecessary expenses, or find new income sources. The key is starting now. Retirement isn’t something to wing—it’s something to plan for.

So, what’s your next step? Time to crunch some numbers and get serious about that dream retirement. Your future self will thank you!