Short answer: run a four-step self-check: (1) list every income source, (2) estimate your true annual spending, (3) compute the gap your savings must cover, and (4) stress-test it at lower returns. If your money survives a 3% return scenario to age 90, your plan is in decent shape.
Step 1: List every income source
Before touching your savings math, write down the income that arrives without selling investments:
- Social Security — get your personalized estimate from the SSA’s official site (it’s based on your earnings record; generic calculators can’t match it).
- Pensions — note whether yours has cost-of-living adjustments or is fixed.
- Rental or business income — use a conservative figure, not the best year.
- Part-time work — only count it if you genuinely plan to keep doing it.
Add these up as annual guaranteed income. This number is the foundation everything else rests on, so get it right before moving on.
Step 2: Estimate your real annual spending
Most people underestimate spending by 15–25%. Build it bottom-up:
- Fixed costs: housing (mortgage/rent, taxes, insurance, maintenance), utilities, insurance premiums, car costs, minimum debt payments.
- Variable essentials: groceries, fuel, clothing, medical out-of-pocket.
- Discretionary: travel, dining, hobbies, gifts.
- The forgotten ones: home repairs (budget ~1% of home value/year), car replacement (amortize the cost over its expected life), and taxes on withdrawals.
Track three months of actual spending with bank statements — not memory — and annualize it. Then add a 10% buffer for the things you forgot. Call this annual spending need.
Step 3: Compute the gap your savings must cover
Subtract guaranteed income from spending need:
Gap = annual spending − annual guaranteed income
This gap is what your portfolio must produce each year. Divide it by your total savings to get your withdrawal rate:
- Under 4%: historically comfortable territory.
- 4–5%: workable, but deserves the stress test in Step 4.
- Over 6%: a yellow flag — your plan depends on good markets and needs a backup (spending cuts, part-time income, or delaying retirement).
Step 4: Stress-test with lower returns — a verified example
Averages lie; stress tests tell the truth. Take this illustrative case:
- Savings: $500,000 | Spending need: $50,000/year | Social Security: $18,000/year
- Gap: $32,000/year → withdrawal rate 6.4%
- Retires at 65. How long does the money last at different returns?
| Assumed return | Money lasts | To age |
|---|---|---|
| 5% | 32 years | 97 |
| 3% | 22 years | 87 |
| 0% | 16 years | 81 |
At 5% the plan looks fine; at 3% it runs out at 87; at 0% — a brutal but possible decade — it’s gone by 81. That 6.4% withdrawal rate is the warning sign: this person should trim spending, work a bit longer, or plan part-time income before retiring. Run the same three-return test on your own numbers — if the 3% scenario doesn’t reach your late 80s, your plan needs adjustment.
Reading your results: three verdicts
Green — “likely fine.” Withdrawal rate under 4%, and the money survives the 3% stress test past age 90. Keep an eye on spending creep and recheck every couple of years.
Yellow — “workable with flexibility.” Withdrawal rate 4–6%, or the stress test gets tight around age 85. Build in spending guardrails (trim after down years), keep a cash buffer, and consider part-time income for the first few years.
Red — “needs changes before retiring.” Withdrawal rate over 6%, or the money fails the 3% test before 85. The fixes, in order of impact: delay retirement, cut the spending target, add income, or some combination. Better to adjust the plan now than discover the shortfall at 80.
When to see a financial advisor
A self-check gets you 80% of the answer. Bring in a professional when:
- You’re within 5 years of retiring — the decisions (claiming age, withdrawal order across account types, Roth conversions) get technical and high-stakes.
- You have a complex situation — a pension with options, rental properties, a business to sell, or stock compensation.
- Your verdict is yellow or red — an advisor can model tax-efficient withdrawal sequencing (taxable vs. traditional vs. Roth accounts) that DIY math usually misses.
- You want a second opinion before irrevocable choices like claiming Social Security or buying an annuity.
Choose a fiduciary advisor (legally obligated to act in your interest) — ask directly, “Are you a fiduciary at all times?” — and prefer fee-only compensation over commissions.
Recheck annually
This isn’t a one-time calculation. Revisit the check yearly: update balances, confirm spending hasn’t drifted, and rerun the stress test. A plan you revisit is a plan that survives contact with reality.
Want to project your savings growth first? Use our 457 calculator to model accumulation, then browse every tool in our calculators directory.
Frequently asked questions
How do I know if my retirement savings will last?
Compute your gap (spending minus guaranteed income), divide by savings for your withdrawal rate, then stress-test at 5%, 3%, and 0% returns. If the 3% scenario funds you into your late 80s, the plan is reasonably solid.
What withdrawal rate is safe?
Around 4% is the classic starting point from historical research. Under 4% is comfortable; 4–5% needs flexibility; above 6% is a yellow flag that deserves backup plans like spending cuts or delayed retirement.
How much do I need to retire at 65?
A common guideline is 25× your annual spending gap (spending minus Social Security/pensions). Need $40,000/year from savings? Roughly $1,000,000. Your stress test matters more than any single number.
Should I include my home in retirement calculations?
Generally no — you have to live somewhere. Count home equity only if you have a concrete plan to downsize or relocate and free up cash. Otherwise it’s shelter, not spending money.
When should I hire a financial advisor for retirement planning?
Within five years of retirement, when facing irrevocable decisions (Social Security timing, pension options, annuities), with complex finances, or whenever your self-check comes back yellow or red. Choose a fiduciary, fee-only advisor.
How often should I recheck my retirement plan?
At least annually, and after any big change — market drops, health events, or spending shifts. Retirement planning is maintenance, not a one-time event.
Methodology reviewed September 2026. The stress-test table was computed year-by-year at the stated returns; real markets vary and Social Security rules change — verify benefits on the SSA’s official site. This article is educational content, not financial advice.