It’s one of the most common questions I receive — often asked by people who, by most measures, are already in very good shape financially.
“How do I know when I’m actually ready?”
There’s a version of this question that has a clear, calculable answer. And there’s a version that doesn’t. Most people are only thinking about the first one.
The Financial Side of Readiness
Let’s start with what’s measurable. Financial readiness for retirement generally comes down to a few interconnected factors — and the benchmarks matter more than most people realize.
Sustainable withdrawal rate.
Can your assets support your expected lifestyle over a 25-to-30-year horizon without depleting prematurely? According to Morningstar’s 2025 State of Retirement Income report, the baseline safe starting withdrawal rate for a new retiree seeking inflation-adjusted spending with a 90% probability of not outliving their money over 30 years is 3.9% of initial portfolio value. That number rises or falls based on time horizon, asset allocation, and flexibility — early retirees facing a 40-year horizon may want to be more conservative, while those with shorter horizons or guaranteed income sources may have more room. The key takeaway is that your withdrawal rate isn’t a static number: it’s a starting point that should be revisited regularly in the context of your full financial picture.
Healthcare costs in the gap years.
If you plan to retire before age 65 — the Medicare eligibility threshold — you’ll need a plan to cover healthcare in the interim. According to HealthView Services’ 2026 Retirement Healthcare Cost Data Report, total lifetime retirement healthcare costs for a healthy 65-year-old couple — including Medicare Parts B and D, Medigap (Plan G), dental premiums, and out-of-pocket expenses — are projected to total $661,812 in today’s dollars, or approximately $955,411 in future value. This is one of the most consistently underestimated line items in pre-retirement planning, and it only grows more significant for those who retire before Medicare begins.
Social Security timing.
The decision of when to begin claiming Social Security has lasting consequences. According to the Social Security Administration, for those born in 1960 or later, claiming at age 62 permanently reduces your benefit by 30% compared to waiting until full retirement age (67). Delaying beyond full retirement age earns delayed retirement credits of 8% per year, meaning benefits at age 70 reach 124% of the full retirement amount. In concrete terms for 2026: the maximum monthly benefit at age 62 is $2,969, versus $5,181 at age 70. For high earners with strong longevity indicators, delay is often the more financially sound choice — though it is never a simple calculation, and the right answer depends on your health, income needs, and overall plan.
Liquidity and sequence-of-returns risk. A significant portfolio decline in the first few years of retirement — known as sequence-of-returns risk — can permanently impair a portfolio’s longevity, even if markets eventually recover. Maintaining two to three years of living expenses in cash or near-cash equivalents gives a portfolio the runway it needs to recover without forcing asset sales at depressed prices. This risk is not theoretical: retirees who were forced to sell equities during the 2008–2009 financial crisis faced materially different retirement outcomes than those who had adequate liquidity to wait it out.
These are the questions a good financial plan will address directly. And if the answers are solid, the numbers part of retirement readiness may well be there.
The Part Most Plans Don’t Cover
Here’s where I find that most planning conversations stop short.
Financial readiness is necessary — but it’s not sufficient. In my experience, the people who struggle most in the first one to two years of retirement aren’t the ones who ran out of money. They’re the ones who didn’t know what to do with their days.
Retirement removes the structure, the identity, and often the social connections that careers provide. For many high-achieving professionals — physicians, academics, executives — that structure is so deeply woven into daily life that its absence feels disorienting, even when it was something they were looking forward to.
Psychological readiness for retirement involves different questions:
- Do you have a clear sense of how you’ll spend your time — not just in the first few weeks, but on an ordinary Tuesday six months in?
- Do you have meaningful relationships and pursuits outside of your professional identity?
- Are you retiring toward something specific, or simply away from something you’re tired of?
- Have you talked honestly with your spouse or partner about what daily life in retirement looks like for both of you?
These aren’t soft questions. They’re part of what separates a smooth retirement transition from a rocky one.
The Test I Use
When I work with clients who are trying to decide whether the timing is right, I often ask a simple question:
“If you retired tomorrow, what would you do the day after?”
The people who answer that easily — who already have a picture of what their retired life looks like — are typically the ones who navigate the transition well. The ones who pause, or who describe a vague sequence of rest and travel without much beyond that, are the ones I’d want to spend more time with before confirming a date.
A Note on Timing for High Earners
For professionals with pensions, deferred compensation, or significant pre-tax retirement account balances, the “when” of retirement carries additional financial weight beyond the lifestyle conversation. Coordinating the end of earned income with the start of distributions — managing tax brackets, Medicare IRMAA thresholds, and Required Minimum Distributions that begin at age 73 under the SECURE 2.0 Act — requires a sequenced, multi-year approach that ideally begins five to ten years before the target retirement date.
For example, a physician or tenured professor ending a career with a combination of pension income, Social Security, and required IRA distributions may find that their taxable income in retirement exceeds what it was during their working years in certain periods. Planning for that outcome well in advance — through Roth conversions, charitable giving strategies, or timing of large capital events — can make a meaningful difference in long-term financial health.
There Is No Single Right Moment
Retirement readiness isn’t a line you cross. It’s a combination of factors — financial security, a clear vision for life after work, the right healthcare plan, and often a meaningful transition strategy — that ideally come together at the same time.
Some of my clients retire earlier than they originally planned because the financial picture is strong and the life plan is clear. Others push the date back — not because they have to, but because they want more time to build out what retirement will look like.
Either way, the goal is the same: to retire with confidence, into something, on your terms.
References
- Arnott, A., Benz, C., Kephart, J., & Guo, T. (December 2025). State of Retirement Income 2025. Morningstar. morningstar.com/retirement/whats-safe-retirement-withdrawal-rate-2026
- HealthView Services. (February 2026). 2026 Retirement Healthcare Cost Data Report.hvsfinancial.com/white-papers
- Social Security Administration. (2026). Retirement Age and Benefit Reduction.ssa.gov/benefits/retirement/planner/agereduction.html
- Social Security Administration. (2026). What Is the Maximum Social Security Retirement Benefit Payable?ssa.gov/faqs/en/questions/KA-01897.html
- SECURE 2.0 Act of 2022, Pub. L. No. 117-328, § 107 (2022). Required minimum distribution age raised to 73 beginning January 1, 2023.