When Can We Retire, and Will We Have Enough Income?

Retirement timing depends on more than the size of an investment account. It also depends on expected spending, Social Security, pensions and other income, taxes, healthcare costs, savings, and how long the money may need to last. Retirement planning is about connecting those pieces over time.

Now let's get to one of the biggest retirement questions:

When can we actually stop working?

Most people don't really want to know whether they have a certain number in their investment account.

They want to know whether the money can support the life they're planning.

That's a different question.

How much will you actually spend in retirement?

Start there.

Suppose a household expects to spend $8,000 per month.

That's $96,000 per year.

But retirement spending isn't always static.

Some expenses may decline.

Others may increase.

Healthcare costs can change. Travel may be higher in the early years. Home repairs happen. Long-term care may eventually become a consideration.

So rather than assuming one number will remain constant forever, it's useful to think about how spending might change over time.

What income will you have besides your portfolio?

This is where Social Security, pensions, rental income, and other resources come into the picture.

Let's say a household expects $45,000 of annual Social Security and pension income and expects to spend $90,000.

That creates a $45,000 gap before considering taxes and other factors.

The investment portfolio may be one source used to address that gap.

But again, this is a simplified illustration.

The actual calculation depends on the household's tax situation, investment assets, spending, inflation, Social Security decisions, and other circumstances.

When should Social Security start?

Social Security can be an important part of retirement income.

But deciding when to claim it isn't simply a question of choosing the earliest or latest possible age.

The decision can involve:

Expected retirement timing

Other income

Household circumstances

Longevity considerations

Taxes

The effect of claiming at different ages

There isn't a universal claiming age that is right for everyone.

It's another variable in the retirement-income equation.

What happens if markets fall early in retirement?

This is one reason retirement planning can't rely on a single return assumption.

Imagine someone retires with $1 million invested.

A hypothetical 20% decline would reduce the portfolio to approximately $800,000 before considering withdrawals.

Again, that's an illustration—not a prediction.

Now imagine that the household also needs to withdraw money during that period.

The combination of investment losses and withdrawals can affect the amount remaining in the portfolio.

That's why a retirement plan should be considered under different assumptions rather than only under an expected market environment.

What about taxes?

Here's another piece that can get overlooked.

A household may have $2 million of retirement assets.

But $2 million isn't necessarily $2 million of spendable money.

Traditional retirement accounts can generally create taxable income when distributions are taken.

Roth accounts can have different tax treatment when distributions are qualified.

Taxable accounts have their own considerations.

So when you're asking, "Do we have enough?" you're really asking:

Enough after what?

After taxes?

After healthcare?

After expected spending?

After inflation?

After considering the income you already have?

Those details matter.

So, when can we retire?

There isn't one magic number.

Instead, look at the timeline.

What happens if you retire at 60?

What changes at 62?

What changes when Social Security begins?

What happens at 65?

What happens when required minimum distributions begin?

And what happens if investment returns are different from what you expected?

The goal isn't to predict exactly what will happen over the next 30 years.

That's impossible.

The goal is to understand whether the retirement plan continues to make sense across a reasonable range of circumstances.

Because "Can we retire?" is really shorthand for a much bigger question:

"Can our assets and income support the life we're planning, given the risks and tradeoffs we face?"

That's the question worth answering.

Happy planning.