Are you ready for retirement? EP Wealth Advisors walks through 12 key questions to help you evaluate your retirement readiness and identify areas where your financial plan may need additional attention.
Retirement planning involves more than reaching a savings target. It requires thinking through how your income, expenses, taxes, investments, healthcare, and estate plan will work together once you stop earning a paycheck. The questions below are designed to help you take stock of where your plan stands today and where there may be gaps that are worth addressing.
These aren't pass-or-fail questions. They're starting points that can lead to productive conversations with your advisor about how prepared you’ll be when retirement arrives.
Many people assume that once travel and lifestyle spending slow down later in retirement, overall expenses will decline. However, that is not always the case, as healthcare and long-term care costs often increase over time. This pattern is sometimes referred to as the “retirement spending smile.” Having a clear picture of your expected expenses can help you evaluate whether your income sources and portfolio are positioned to support your lifestyle throughout retirement. If you have not mapped out those expenses yet, this is one of the most important places to start.
Social Security, pensions, rental income, part-time work, and portfolio withdrawals may begin at different points in retirement and may each have different tax implications. If you can map out when each source begins and how much it provides, you can start to see whether there are gaps, particularly in the early years before Social Security or a pension kicks in. If you're unsure where your income will come from, that's a signal that a more detailed plan may be needed.
The difference between claiming at 62 versus 70 can be substantial over a lifetime. Claiming early means a smaller monthly benefit but more years of payments. Waiting means a larger benefit but requires other income sources to bridge the gap. Your health, other income sources, and whether you have a spouse whose survivor benefit could be affected all factor into this decision. If you haven't evaluated these tradeoffs in the context of your full financial plan, it may be helpful to model the different scenarios with your retirement planning advisor.
A portfolio that served you well during your earning years may not be structured for the demands of retirement, when you're drawing income rather than accumulating assets. If your allocation reflects your anticipated income needs, time horizon, and risk tolerance, that's a positive sign. If it hasn't been reviewed with retirement withdrawals in mind, or if you have significant concentration in a single stock or sector, it may be worth revisiting with your advisor.
The order in which you draw from taxable, tax-deferred, and Roth accounts can meaningfully affect how much you pay in taxes each year and how long your portfolio may last. It can also influence the after-tax value of assets that may ultimately pass to heirs. If you have a strategy that weighs the tax implications of each withdrawal, you're ahead of many retirees. If you plan to simply draw from whichever account feels most accessible, you may be leaving more tax-efficient options on the table.
At some point in retirement, the IRS requires withdrawals from tax-deferred retirement accounts such as traditional IRAs and pre-tax 401(k)s. These required minimum distributions (RMDs) generally begin at age 73, or age 75 for individuals born in 1960 or later, and are taxed as ordinary income. For individuals with larger retirement balances, RMDs can increase taxable income, potentially pushing retirees into higher tax brackets or increasing Medicare premiums through IRMAA surcharges. If you have already factored RMDs into your plan and considered strategies such as Roth conversions before they begin, that is a strong indicator of planning readiness. If RMDs aren't yet on your radar, it's worth exploring how they could affect your income and tax situation.
If you retire before age 65, you'll need to bridge the gap to Medicare eligibility with private insurance, the Consolidated Omnibus Budget Reconciliation Act (COBRA) continuation coverage, or a marketplace plan. Even after Medicare begins, out-of-pocket expenses for premiums, supplemental coverage, dental, and vision can add up. It's also worth noting that your income in retirement can directly affect your Medicare premiums through Income-Related Monthly Adjustment Amount (IRMAA) surcharges, which are based on modified adjusted gross income (MAGI) from two years prior.
Beyond routine healthcare, consider how you would cover the cost of long-term care if it becomes necessary, whether through long-term care insurance, self-funding, or another approach. If you've estimated costs across all of these areas and factored them into your plan, you're in a good position. If healthcare is still a vague line item, this is an area worth getting specific about.
The timing of market returns can matter just as much as the returns themselves. A market downturn in the first few years of retirement can have a lasting effect on how long a portfolio lasts, even if markets eventually recover. This is often referred to as sequence-of-returns risk. When you're withdrawing during a down market, you're selling more shares to generate the same income, leaving fewer shares to participate in the recovery. If your plan has been tested through scenario analysis or Monte Carlo simulations, you have a better sense of how resilient it is. If it hasn't, you may not have a clear picture of how a downturn could affect your timeline.
A mortgage or other debt doesn't automatically disqualify you from retiring comfortably, but it does need to be factored into your retirement cash flow projections. In some cases, paying off debt before retirement makes sense. In others, maintaining a low-interest mortgage and keeping assets invested may be the better approach. The answer depends on your interest rate, tax situation, liquidity needs, and how the debt interacts with your broader withdrawal strategy.
Wills, trusts, powers of attorney, healthcare directives, and beneficiary designations should all reflect your current wishes and work together with your broader financial plan. Beneficiary designations on retirement accounts and life insurance policies are especially important, since they typically override what's written in a will. If it's been several years since these were reviewed, or if you've experienced a major life change such as a marriage, divorce, the birth of a grandchild, or the loss of a family member, there may be gaps worth addressing before you retire.
The loss of a spouse can significantly change a household’s financial situation. It may mean the loss of income sources such as a Social Security benefit or, in some cases, a pension, along with a shift from married filing jointly to single tax status. For many couples, the surviving spouse’s tax burden may actually increase even as household income decreases. If you have evaluated this scenario and accounted for it in your plan, you are addressing one of the more common and impactful risks in retirement. If not, it may be worth reviewing how this situation could affect your financial plan with your advisor.
A retirement plan is only as useful as the assumptions behind it. Income, expenses, tax laws, market conditions, and personal circumstances may change over time. If you review your plan periodically, such as annually or after major life events, and adjust as needed, you're more likely to catch issues early and take advantage of new opportunities. If your plan is several years old and hasn't been revisited, it may no longer reflect where things actually stand.
If you have significant wealth, business interests, or a more complex financial picture, the 12 questions above are a starting point, but there are additional considerations worth evaluating.
The above questions are designed to help you evaluate where your retirement plan stands and where it may need attention. An experienced financial planning advisor can help you connect the dots between these areas, model different scenarios, and identify strategies you may not have considered.
Whether you're years away from retirement or approaching it soon, a focused conversation can help clarify your priorities and outline practical next steps. Contact EP Wealth Advisors to start the conversation about your retirement readiness.
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