Do you have enough to retire?

Key takeaways

• Answering "do I have enough?" comes down to four steps: what your retirement costs, what income you'll have that doesn't come from your portfolio, what's left over for the portfolio to cover, and what that target grows to by the year you actually retire.
• Count the non-portfolio income before you size the portfolio. Leaving Social Security out of the math can nearly double the target you think you're chasing.
• Run the whole thing in today's dollars, then inflate once at the end. Inflating your spending but not your Social Security estimate is the most common way this calculation goes wrong.
• A withdrawal rate is what turns your annual need into a portfolio balance. It's a sizing tool, not a retirement plan.
• Whatever number falls out is an opening position. Taxes, health costs late in life, a pension without a cost-of-living adjustment, and how long you end up living all move it, and they don't cancel each other out.

If you asked me to boil down what I did for work, a pretty solid answer would be that I help people answer the question: "Do I have enough to retire?" Sure, I answer many more questions along the spectrum of personal finance, but many of them tie back to the big question.

The answer seems easy at first; it's a yes or a no. But there is a lot of weight behind that "enough", and what that means for you.

So I want to walk through how I actually get to an answer, or a specific number. There are four main steps that I'll go through, and then a laundry list of considerations that go along with those four steps. I'll keep the math at the level we can run on a napkin with a calculator, because I think the value here is in the order of the questions rather than in the precision of the numbers.

Step one: what does your retirement actually look like?

Before we get to the end number, we need three things:

• When are you planning to retire?
• What does a "successful" retirement look like to you? and,
• What does that cost?

The last one is usually the sticking point, so it's ok to start with a rough estimate. Take what you spend today, and strip out the things that won't follow you into retirement, like your mortgage and the taxes coming out of your paycheck. You can also add any new anticipated expenses, like the travelling you want to do each year when you retire, and then you have a working number in today's dollars.

Step two: what income do you have that isn't coming from your investments?

This step is pretty simple, but if you forget to do it, your end result will be way off.

Some of your retirement income will not come from your investments at all. Social Security, a pension if you have one, rental income, an annuity, any part-time work you want to do, or some other type of passive income. I think of this as your income floor, so we want to know the percentage of your retirement spending that the floor already covers.

Let's say you land on $100,000 of spending in retirement, and your Social Security benefit will be about $45,000 a year, again both in today's dollars. Your income floor then covers 45% of your retirement expenses. The remaining $55,000 is the part your portfolio has to produce.

Step three: now you can size the portfolio

Your portfolio need is your spending in retirement minus your income floor. In our example, $55,000 a year.

Turning that into a target portfolio balance requires a withdrawal rate. The familiar one is the 4% rule, which came from a 1994 study by Bill Bengen, where he looked at what a retiree could pull from their portfolio each year, adjusting it for inflation, and not run out over 30 years of historical market data.

In 2025, Bengen revised his own number to 4.7% after rebuilding the underlying portfolio with a broader mix of assets, and he describes this withdrawal rate as a worst-case starting point rather than a specific target.

At the more conservative 4% withdrawal rate, an annual distribution of $55,000 would require a portfolio balance of $1,375,000. At 4.7%, that required portfolio drops to $1,170,000.

Let's say you skipped step two, and ran the same 4% withdrawal rate on the full $100,000 of needed retirement income. That increases the required portfolio to $2.5 million. That's close to double, and really changes the trajectory to when you're able to answer "yes" to the main question about having enough to retire.

Step four: inflate that target to the year you retire

Every number we calculated so far is in today's dollars. So the last step is to inflate the whole thing once, out to the year you plan to retire. At 3% inflation, that $1,375,000 becomes about $2,483,000 in 20 years. If you're 45 and planning to retire at 65, the second number is the one you're actually saving toward.

One thing you don't have to adjust for is inflation once you're already retired. Bengen's rule raises the withdrawal by inflation every year to keep pace, so that piece is built into the 4% rule itself.

What the four steps leave out

The four steps give you a tangible number, and I think it's a solid starting point. But it's built on a set of assumptions that may or may not hold up over a thirty-year (or longer) retirement. Here are some of those assumptions that I work through.

Note that I'm going back to the numbers pre-step four. All of the important math really happens in the first three steps, and whatever you land on then gets inflated the same in step four. Plus, it's just easier to talk about things in today's dollars, it's a bit more intuitive.

The number you just built is pre-tax

If that $1,375,000 is sitting in a traditional 401(k) or IRA, every dollar you pull out is ordinary income, and the $55,000 you withdraw is not $55,000 you get to spend. In a Roth, a qualified withdrawal of $55,000 is $55,000 in your pocket. In a taxable brokerage account, only the gain portion is taxed, and usually at long-term rates.

So two people with identical $1,375,000 portfolio balances can be funding two different retirements, depending entirely on which account type the money sits in. The withdrawal math doesn't distinguish whether that number is pre-tax or post-tax. Depending on the account you're pulling from, the calculated $55,000 you need to spend might require withdrawing more than you anticipated to cover the taxes.

There's even more tax complexity beyond which account distributions come from. The amount of Social Security that is considered taxable depends on your other income. Medicare premiums carry surcharges at higher income levels, looking back two years for that determination. Retire before 65 and your marketplace health insurance subsidy is driven by the income you report, which means the account you withdraw from can affect what your insurance costs. And required minimum distributions start at 73 or 75 depending on when you were born, which force you to take taxable distributions whether you need the money or not.

Your income sources don't all keep up with inflation

Social Security has a cost-of-living adjustment (COLA). For 2026 it was 2.8%, and it gets reset every year based on inflation data.

A pension may or may not have a similar adjustment. Federal law doesn't require a private pension to adjust its payments for inflation, and building one in is expensive for the employer funding the plan. State and local government plans are on the other end of the spectrum, where roughly three-quarters provide some automatic adjustment, usually capped at 2% or 3% a year.

A flat $45,000 pension still pays $45,000 in twenty years, but at 3% inflation it buys what about $24,800 buys today. When your income floor doesn't keep up with inflation, your portfolio has to make up the shortfall.

This type of stuff doesn't usually show up in a single-year calculation, and it's part of why I think the four-step method is a starting point rather than the answer.

Your spending won't be a flat line either

The four-step math assumes you spend the same amount every year for thirty years. The research on how retirees actually spend says otherwise.

David Blanchett's research on retiree spending, published in the Journal of Financial Planning, found that inflation-adjusted spending declines roughly 1% a year on average, but the path isn't a straight line down. Spending runs higher in the early years, when you're healthy and doing the things you've been waiting your whole life to do. Then spending slows in the middle years of retirement. Then it tends to rise again in late retirement, usually due to health costs. Visualized, the shape is called the "retirement spending smile", and it definitely doesn't look like the flat line the basic math assumes.

For just a little bit of data on health costs, Fidelity's 2026 estimate puts lifetime out-of-pocket medical costs for a 65-year-old retiring this year at about $185,500, or roughly $371,000 for a couple retiring together, assuming Original Medicare. That figure excludes long-term care entirely.

And if you retire before 65, you're buying your own coverage until Medicare starts, which is its own line item in the years you probably wanted to spend on something else.

Nobody knows how long the money has to last

The 4% rule assumes 30 years because 30 years is a reasonable planning horizon, not because retirement always lasts 30 years (shocker, right?). If you happen to somehow know exactly how long your retirement will last, the projections get a lot easier. But for most of us, it's a nonstarter.

A 65-year-old man has about 18.5 years of life expectancy left, a 65-year-old woman about 21, according to Social Security's own actuarial tables. Those are averages, so half of us will live even longer.

If you retire at 55, you might be funding 40 years. Retire at 70 and it might be 20 or 25. So the math is heavily dependent on how long your retirement will last. This is the one variable nobody gets to know in advance, which is why I'd rather plan long and adjust as we go.

Your income doesn't all start on the day you retire

The four-step math assumes your entire income floor begins the moment you stop working. Unfortunately, it's not that easy most of the time.

For example, you may retire at 60, but your pension doesn't start until 62, or 65. Or you retire at 62 and decide to delay Social Security to 70. In that scenario, your portfolio now has to cover 100% of your spending for eight years straight before the buffer from your income floor kicks in.

A flat 4%-a-year assumption doesn't see those bridge years at all. They're also the lowest-income years you'll have, since Social Security hasn't started yet and required distributions are still years away, which is what makes them the window where Roth conversions get interesting.

So what do you do with all of this?

Well, I'd start by running your own household through the four steps. I believe a lot of the anxiety around this question comes from never having put an actual number on it, and a rough number you can see beats a vague dread you can't. The devil you know, and all that.

Then treat that number the way I do, as the opening position rather than the verdict. Every factor above pushes it in one direction or another, and they don't cancel out neatly. Taxes push the requirement up. A higher income floor pushes it down. Declining real spending through your seventies pushes it down, but health costs in your eighties push it back up. A pension without a COLA pushes it up slightly every single year. Delaying Social Security pushes it up in the bridge years and down for the rest of your life.

That's the part I actually spend my time on, and it's where the answer to "do I have enough?" expands from just a math question into a full fledged plan.

Once you have a number as a starting point, there's a step after this one that I'll save for its own post. Once you have the target, the next question is what it takes to get there: how much you need to save each month, given what you've already put away and how many years you have left. That's where the timeline from step one comes to the forefront, because so far it's only job has been to tell us how many years to inflate that target number by.

I wrote this because I think there are many people that are just looking for somewhere to start. You can get pretty darn close to your own answer in an afternoon with four steps and a calculator. What you can't do in an afternoon is figure out everything that number leaves out, and that's fine, because you don't have to do that part alone.

Sources

• Bengen, William P. "Determining Withdrawal Rates Using Historical Data." Journal of Financial Planning, October 1994. Link
• Bengen's revision to 4.7%, from A Richer Retirement (2025), summarized in Advisor Perspectives, August 2025. Link
• Social Security Administration, 2026 Cost-of-Living Adjustment fact sheet, October 2025. Link
• National Association of State Retirement Administrators, "Issue Brief: Cost-of-Living Adjustments," June 2026. Link
• Blanchett, David. "Exploring the Retirement Consumption Puzzle." Journal of Financial Planning, May 2014. Link
• Fidelity Investments, 25th annual Retiree Health Care Cost Estimate, July 2026. Link
• Social Security Administration, Actuarial Life Table (period life table). Link

This post is general information, not personalized advice. Talk to a fee-only fiduciary about your specific situation.