Deciding whether you are ready to retire can feel overwhelming, but the question ultimately comes down to three concrete numbers. Get a clear handle on all three and the answer becomes much easier to see.
Here’s what they are.
1. Investment account balance
The first number you need to know is your total investment account balance: the combined value of your 401(k), IRA, and any taxable brokerage accounts. These savings will supplement your Social Security income once you stop working, which makes knowing the precise figure essential. Beyond the raw balance, though, you should also consider the tax-adjusted value of each account. A dollar sitting in a traditional 401(k) will eventually be reduced by income taxes when withdrawn, while money in a Roth IRA comes out entirely tax-free. The accounts may show the same balance on paper, but they are worth different amounts after taxes.
Once you know your total balance, a safe withdrawal rate tells you how much annual income those savings can reliably provide. Morningstar’s 2025 retirement income research sets the base-case safe starting withdrawal rate at 3.9% for a portfolio holding 30% to 50% in equities, assuming a 30-year retirement horizon with a 90% probability of success. That is up from 3.7% in the prior year’s research. For a retiree with $850,000 saved, that 3.9% rate translates to roughly $33,150 in first-year income from savings alone. The classic 4% rule remains a useful benchmark, but retirees who want the greatest margin of safety may prefer the slightly more conservative Morningstar figure, while those willing to adjust withdrawals dynamically in down markets can stretch their rate higher.
2. Social Security benefit
The second number is your projected Social Security benefit. This monthly payment is a uniquely valuable income source because, unlike a portfolio balance, it is guaranteed to last for life and automatically adjusts for inflation each year. For 2026, the Social Security Administration announced a 2.8% cost-of-living adjustment, raising the average retired worker’s monthly benefit from $2,015 to $2,071. That increase of roughly $56 per month reflects the COLA tied to changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers.
Social Security is designed to replace roughly 40% of pre-retirement income, though the actual share varies by earner. The formula is progressive, so higher earners see a smaller percentage replaced. Timing matters just as much as the formula itself. Claiming benefits before your full retirement age permanently reduces each monthly check, while waiting past full retirement age earns delayed retirement credits that increase the benefit by roughly 8% for every year you hold off, up to age 70. If you expect a long life or need to maximize the survivor benefit your spouse would receive, delaying almost always pays off. Calculating your personal breakeven point for waiting until 70 can clarify whether the larger monthly checks eventually outweigh the years of missed payments.
The size of this benefit directly shapes how much your savings need to provide. You can find your personalized estimate through your online Social Security account, which projects your monthly payment at different claiming ages.
3. Annual expenditures
The third number is your projected annual spending. Your combined income from Social Security and savings must cover everything you plan to spend in retirement, including costs that many people consistently underestimate. Healthcare deserves particular attention. Fidelity’s 2025 Retiree Health Care Cost Estimate puts lifetime medical expenses for a single 65-year-old at $172,500, a figure that rose roughly 4.5% from the prior year’s estimate of $165,000 and does not include long-term care. For a couple, the comparable estimate climbs to approximately $345,000. The 2026 Medicare Part B standard premium is $202.90 per month, an increase of $17.90 from 2025, and the annual Part B deductible is $283. Both figures tend to grow every year, which means healthcare costs require their own dedicated line in any retirement budget.
A useful starting point for setting your retirement spending target is to aim for enough income to replace about 80% of your pre-retirement earnings. Keep in mind that many retirees follow what researchers call a “spending smile” pattern: outlays are highest in the active early years, ease off in the quieter middle stretch, and then climb again as medical costs rise later in life. A budget that reflects this arc gives a more accurate picture than one that assumes flat annual spending throughout retirement.
Once you have all three numbers in hand, the final step is to stress-test them against sequence-of-returns risk. A severe market decline in the first few years of retirement can permanently deplete a portfolio before it has a chance to recover, even if the long-run average return looks acceptable on paper. Retirees who account for that risk alongside their balance, their benefit, and their budget are far better positioned to leave work on their own terms.
Editor’s note: This pass updated the Fidelity lifetime healthcare cost increase to roughly 4.5% (from the prior year’s $165,000 estimate), added the comparable $345,000 couple figure from the same Fidelity report, incorporated the precise $17.90 Medicare Part B premium increase and the $283 annual Part B deductible for 2026, and sharpened the Social Security COLA paragraph to include the pre-COLA baseline of $2,015 and the $56-per-month increase confirmed by the SSA’s official 2026 fact sheet.
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