By Eric Greschner
In our first meeting, I’m often asked the same question:
How do I know when I can retire?
It may seem like there should be a clear age or savings number that tells you when you’re ready, but the decision is usually more personal than that. In my experience, retirement readiness comes down to three important areas:
- Having an income plan that can support you
- Understanding what healthcare will cost
- And knowing how you want to spend your time once work is no longer at the center of your days.
Here’s how to think through each one.
Sign 1: You Have a Retirement Income Plan
The day you retire is the day you stop receiving a paycheck. Now you’re building your own, which is why a retirement income plan is the first thing we look at. It answers which accounts you’ll draw from, in what order, and roughly what you can spend each month without worry.
Before choosing a retirement date, you should have a clear picture of:
- Your expected monthly spending in retirement
- How much income you’ll receive from Social Security
- Any pension income and the decisions that come with it
- Which investment accounts you’ll draw from first
- How taxes may affect your retirement income
- How much you’ll keep available in cash or reserves
- How your income plan would respond to a significant market decline
The order is more important than you might expect. Pulling from a taxable account, a 401(k), and a Roth in different sequences produces very different tax bills across a retirement that may run 30 years. When to claim Social Security belongs in the same conversation, and so does a pension if you have one. That’s especially relevant for many families we work with throughout Southeast Louisiana, including the Baton Rouge area, where refinery, petrochemical, engineering and other long-tenured careers may include pension benefits alongside 401(k) savings and Social Security.
There’s also a risk to take note of here. A large loss in the first few years of retirement does more damage than the same loss 10 years in, because you’re selling investments to live on while their value is down. Limiting that downside is the center of how we invest, and it’s why we want your retirement paycheck mapped out on paper before you give notice.
For example, consider a couple in the Baton Rouge area approaching retirement with a 401(k), pension, and Social Security benefits. They may have accumulated enough assets to retire on paper, but their actual retirement date can depend on several decisions: when they claim Social Security, which pension option they choose, how they’ll cover healthcare before Medicare, and which accounts they draw from first. Looking at those decisions together can give them a much clearer answer than focusing on their account balance alone.
Sign 2: You’ve Priced Out Healthcare
If you plan to step away before 65, you need a bridge to Medicare, and that cost can be a surprise to many families. Coverage in those years usually comes from an employer plan continued through COBRA, a spouse’s plan, or the individual marketplace, and each one carries a different premium and a different network of doctors.
Take the time to price it before you pick a date rather than after. I’ve watched people move a retirement date once they saw the real number, and I’d rather they see it early enough to decide calmly. If you’re retiring at 65 or later, Medicare has enrollment windows with penalties for missing them, and those premiums belong in the monthly budget alongside everything else.
Sign 3: You Know What Your Time Is For
This one sounds soft, and it’s the one often underestimated. The happiest retirees I work with retired to something. Hobbies, grandkids, travel, a cause they care about, a business they’d always meant to start.
Money answers whether you can retire, but purpose answers whether you’ll be glad you did. If you can describe what an average day looks like six months in, that’s a good sign you’re ready.
What to Do if One of the Three Is Missing
Missing one of these components isn’t a reason to work indefinitely; it’s a reason to put the plan on paper. A written game plan clarifies your goals and your time frames, and it sets benchmarks so that a year from now you can measure where you stand against something real instead of a feeling, a hope, or a guess. That’s the third step of the seven-step process we follow with every client, and it’s usually where the fog lifts for someone who has been circling a retirement date for years.
Still Wondering, “When Can I Retire?”
Good retirement planning should help you answer a very personal question: When can I retire? And it starts with understanding where your income will come from, month by month, once the paycheck stops.
At Regatta Research, we prepare a complimentary written financial plan for the families we meet with, at no charge and with no obligation to that first meeting. If you’d like a second read on your own retirement date, schedule a consultation online with our team in Metairie or Baton Rouge.
Frequently Asked Questions
Can I retire at 62?
You can claim Social Security as early as 62, though the benefit is permanently reduced compared with waiting. Whether you can retire then depends on whether your savings and any pension cover your spending until other retirement income begins, and on how you’ll pay for health coverage before Medicare starts at 65.
How much money do I need to retire?
There’s no single number that fits everyone for retirement, because the answer follows what you spend rather than what you’ve saved. Start with your actual monthly spending, subtract what you’ll receive from Social Security and any pension, and the remainder is what your portfolio needs to cover.
What happens to my health insurance if I retire before 65?
You’ll need coverage until Medicare eligibility begins at 65. The usual paths are continuing your employer plan through COBRA for a limited period, joining a spouse’s plan, or buying a policy on the individual marketplace. Compare premiums, deductibles, and whether your doctors are in network.
How do I know if my retirement income plan will hold up in a bad market?
Test it against a downturn rather than an average year. A written plan should show what happens to your income if the portfolio drops early in retirement, and what you would change in response. Investing always involves risk, including possible loss of principal.
About Eric
Eric Greschner co-founded Regatta Research & Money Management in Metairie, Louisiana, with his father. As a Managing Partner, he serves as an Investment Advisor Representative and Wealth Manager. He is a Certified Financial Educator through the National Financial Educators Council and has trained financial, regulatory, compliance, tax, and legal professionals throughout the United States and the United Kingdom, drawing on a career that began in institutional research and market strategy on Wall Street.
Regatta Research and Money Management is a Registered Investment Adviser with the Securities and Exchange Commission. This is for informational purposes only and does not constitute a solicitation or offer of services.
