Moneywise and Yahoo Finance LLC may earn commission or revenue through links in the content below. Deciding when you can afford to retire would be a lot easier if there were one savings number that guaranteed you were ready. But there are a few benchmarks that can help you figure out where you stand.
Looking at how much income your savings can generate, how your nest egg compares with common retirement targets and when you can access your money without an early-withdrawal penalty can give you a clearer picture of whether you're financially ready to stop working. Jeff Bezos backs a platform that lets anyone invest in rental homes for as little as $100 — 6 ways to build wealth like a landlord without actually being one JPMorgan sees gold hitting $5,000/oz by Q4 — and savvy investors are protecting their wealth with a tax-advantaged Gold IRA. Get your free guide from Priority Gold The tax breaks in Trump's 'big beautiful bill' expire after 2028.
Here are 4 moves to make before the window closes That matters because even a seven-figure nest egg can look very different depending on how much you expect to spend, when you retire, the income you'll receive from Social Security or a pension and how long your savings need to last. And those expenses can add up quickly. Households headed by someone 65 or older spent an average of $61,432 in 2024, according to an analysis of Bureau of Labor Statistics data.
Housing alone accounted for more than $22,000 of that annual spending (1). So before you decide whether you've finally saved enough to retire, here are three common benchmarks that can help put your retirement readiness to the test. The first principle worth considering when planning your retirement is the 4% rule.
The guideline calls for withdrawing 4% of your savings in your first year of retirement, then adjusting that amount for inflation in subsequent years, with the goal of making your money last for roughly 30 years. While the 4% rule isn't a perfect fit for everyone (some retirement experts argue that retirees should use more flexible withdrawal strategies that account for factors such as market performance, spending needs and life expectancy), it remains a widely used starting point to determine how long your savings might last. That's because it offers a simple way to estimate how much annual income your savings might provide and whether your current nest egg is in the ballpark of what you'll need.
For instance, if you have $500,000 saved, a 4% initial withdrawal would provide $20,000 in the first year. With $2 million saved, that figure would rise to $80,000. The more important question is whether that income, combined with Social Security, a pension or other sources of retirement income, would be enough to support your expected lifestyle.
Extract — continue reading at the source.
