Do you have a specific age when you want to retire, like 60 or 70 or somewhere in between? If you are targeting a certain retirement age, you may be focused on the wrong thing — at least if you listen to finance expert Dave Ramsey. Based on Ramsey’s retirement advice, retirement isn’t something that happens at a specific age. Instead, you can retire only when you have a big enough nest egg to support you.
Your retirement readiness, in other words, is not based on the fact you hit a certain milestone birthday. The financial number you need to look at is your investment account balance so you will understand whether you have the income that you need to live on or whether you must keep working longer until you acquire the right amount of invested funds.
So, how can you find your financial number so you will know if you are ready to retire or not? Here’s what you need to do.
The 2026 Retirement Landscape: Growth vs. Friction
While the fundamental logic of hitting a specific milestone number remains unchanged, the macroeconomic environment introduces new points of friction for savers. A modest 2.8% Cost-of-Living Adjustment (COLA) for Social Security benefits faces significant pressure from an aggressive 9.7% spike in Medicare Part B premiums, which raises the base monthly cost to $202.90. This widening gap means retirees must secure higher reliable cash flows from their portfolios. Furthermore, with Federal Reserve benchmark interest rates stabilizing between 3.4% and 3.6%, savers can no longer coast on hyper-inflated cash yields, making structured dividend growth assets and real estate investments crucial for principal preservation.
Calculating the financial number that shows you are ready for retirement
There are a few different ways to calculate the amount that you must have invested to be ready for retirement.
The most precise way to decide whether you’re ready to retire is to build a detailed budget and confirm that your savings can generate enough income to cover it. This method takes more work, but it offers the most accurate answer, especially if you’re close to retirement and can estimate your spending with confidence.
For example, if you expect to spend $60,000 per year and Social Security will provide $25,000, your nest egg needs to produce the remaining $35,000. Once you know the gap your savings must fill, multiply it by 25 if you plan to follow the 4 percent rule. This guideline suggests that withdrawing 4 percent of your portfolio in the first year of retirement, then adjusting each year for inflation, gives you a strong chance of not running out of money.
Using that approach, needing $35,000 in annual income means you’d need about $875,000 saved. If you’ve reached that number, you’re on track to retire. If not, your finances aren’t ready yet regardless of your age.
If you don’t have a clear retirement budget yet, you can still estimate your goal by assuming you’ll need to replace 70 to 90 percent of your pre-retirement income. For instance, if you earn $50,000 and want to replace 90 percent of it, your savings would need to generate $45,000 per year. Multiply $45,000 by 25, and your target comes to about $1.125 million.
There’s also a simpler rule of thumb: multiply your final annual salary by 10. If you expect to retire while earning $100,000, this guideline suggests aiming for a $1 million nest egg. Once you hit that number, you’ve reached your retirement readiness benchmark.
How should you determine your financial number?
Each of these different calculation methods can help you arrive at the financial number you need to retire. There’s no one method that’s best, as it depends on where you are in your life and how good you are at anticipating your future spending needs.
Still, the bottom line is that Ramsey is right. No matter how old you are, if you can’t hit your target number and generate enough income to support yourself, retiring is likely a bad idea. Instead, it’s best to keep working and saving for a little longer to build up the nest egg necessary to have the security you deserve.
Action Plan: How to Fund the Gap Today
To reach these targets, savers can leverage updated internal revenue limits. The standard 401(k) contribution limit stands at $24,500, with an regular catch-up contribution allowing those aged 50 to 59 to save up to $32,500, while the specialized catch-up provisions for workers aged 60 to 63 maxes out at $35,750. Traditional and Roth IRA limits sit at $7,500, or $8,600 for savers aged 50 and older, subject to standard phase-out income thresholds. Maximizing savings across these mechanisms involves prioritizing any available corporate matching contributions first, followed by utilizing tax-free growth vehicles, before completing the remaining savings allocations back into employer-sponsored accounts.
Editor’s Note: This article was updated to include contemporary financial metrics, including 2026 IRS contribution limits for 401(k) plans, catch-up rules, and IRAs, alongside updated Social Security COLA distributions, Medicare premium changes, and prevailing Federal Reserve benchmark interest rates.
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