Are You Really Ready to Retire?  7 Questions to Ask Yourself

Being ready for retirement isn’t a number or a state of mind. It goes beyond hitting a target, whether that’s a specific age or accumulating a certain amount of wealth. 

True readiness requires purposeful preparation and a strategic framework that accounts for the several complex, interconnected variables that impact whether you can retire comfortably and confidently.  

These seven questions are designed to help you identify where you’re ready for retirement, and where gaps still remain. 

1. Is Your Plan Built for Retirement or Just Growth? 

When many people think of retirement planning, they conflate their strategy for saving for retirement with the spending strategy they’ll need to employ during retirement. However, they are two distinct parts of a holistic retirement plan.  

The strategy that built wealth for retirement isn’t necessarily the one that will allow you to sustain financial health throughout retirement. The shift from accumulation to distribution is perhaps the most important transition most investors never prepare for. Distribution changes everything about how your portfolio should be constructed. It needs to simultaneously fund the life you desire and last the next 20 to 30 years. 

2. Is Your Plan Resilient Enough to Endure Market Volatility? 

Uncertainty and volatility are part of today’s financial environment. Beyond the reality that stocks rise and fall, we must contend with a complex, connected global market in which unexpected events impact account balances overnight. Unfortunately, unlike in the accumulation phase, retirees in the distribution phase don’t have the luxury of riding out downturns.  

While you can’t control market conditions, there are strategies that can be employed to build a robust retirement plan designed to manage the need for predictable income against volatility and risk. The goal isn't to eliminate risk, but to build a strategy resilient enough to succeed in a variety of market conditions. 

3: Do You Have a Retirement-Specific Tax Strategy? 

Taxes may be both your largest and most controllable retirement expense. How you manage taxes in retirement can cost or save you hundreds of thousands of dollars, and requires you to shift your mindset from filing taxes once a year to active tax management.   

Taxes are a given, but the amount you owe is not. Balancing the mix of income across tax buckets (pre-tax, taxable, and tax-free), navigating required minimum distributions (RMDs) and Social Security payments, and taking advantage of targeted strategies such as Roth conversions can help minimize your tax burden and maximize retirement income.  

4. Have You Accounted for Long-Term Inflation? 

What things cost today is not what they will cost two years from now, let alone two decades from now. Even if it’s not currently at the level of what we’ve seen in recent years, inflation can erode your purchasing power. While moderate year-to-year inflation may seem manageable, the compounding effect over three decades can undermine your plan.  

For retirees, inflation can be particularly painful, increasing healthcare and long-term care costs, which they rely on more than the general population. Accounting for inflation and stress-testing against it should be part of your retirement strategy.   

5. Do You Know What Medicare Will Actually Cost and Cover? 

For many retirees, healthcare is the largest expense they fail to plan for. The problem is two-fold, and both issues result from poor assumptions.  

1. Many people entering retirement make the mistake of planning for the future based on their current health. In reality, healthcare needs increase with age. In 2020, healthcare spending for those over 65 was nearly 2.5 times higher than that of a working adult. 
      
2. People typically assume Medicare covers more than it does, resulting in higher-than-expected out-of-pocket costs. Navigating the intricacies of Medicare to ensure appropriate coverage and strategically planning income to avoid IRMAA (Income-Related Monthly Adjustment Amount) surcharges are important areas every retirement plan should address.   

An unplanned, uncovered (or under-covered) medical event is one of the biggest risks to an otherwise strong retirement plan. 

6. Where Will You Live for the Next 25 Years? 

The most important retirement decision often has nothing to do with investment strategy. It’s about where to live. Most people default to staying in the family home. Few stop to ask whether that decision makes sense for the next 25 years.  

There are pros and cons to every option, from aging in place and downsizing to retirement communities and moving closer to family. However, it’s not just a lifestyle decision. Where you live in retirement has financial implications for cash flow, flexibility, healthcare access and costs, and estate planning.  

7. Have You Stress-Tested Your Plan? 

If your retirement plan only works if everything goes as expected, it’s more wishful thinking than an actual plan. Change is one of life’s few certainties, and your plan should account for the most common curveballs.   

Scenario planning allows you to model multiple scenarios to stress test your strategy against retirement’s big what-ifs, such as:  

• Delaying Social Security 
• A market downturn early in retirement 
• Elevated inflation 
• A long-term care event 
• Living into your late 90s 
• A housing transition 

Readiness Is an Ongoing Process 

Being ready for retirement isn’t a moment. It’s an ongoing process that requires comprehensive strategic planning that begins well before your final day of work and extends seamlessly into the years and decades after your career ends.  

Retirement requires just as much planning, if not more, than the years that lead up to it. These questions are intended as a checklist for you to gauge your current readiness and identify areas to address as you prepare for the next phase of your life.