The Employee Benefit Research Institute has run its Retirement Confidence Survey for more than three decades, and one finding shows up in wave after wave: a large share of American workers feel at least somewhat confident about retirement — while far fewer have ever calculated what they'll actually need.
Confidence without a calculation is hope, not a plan. The good news is that the calculation isn't mysterious. It comes down to seven questions, and you can start answering all of them this week.
1. What will you actually spend each month?
Not a rule of thumb — your number. Housing, healthcare, food, travel, the grandkids. Most spending doesn't drop as much at retirement as people assume, and some categories (healthcare, leisure in the early years) go up. If you only answer one question on this list, make it this one: nearly every other retirement decision is built on top of it.
2. How much reliable income will show up no matter what?
Social Security, pensions, annuity payments — income that arrives whether markets cooperate or not. Subtract that from your monthly number in question 1. The difference is what your savings must produce. Many people are surprised in both directions: some find the gap smaller than feared, others discover the gap is real and the sooner it's known, the more options exist.
3. When should you claim Social Security?
Claiming at 62 versus waiting until 70 can change your monthly benefit dramatically — and the right answer depends on health, work plans, spousal benefits, and what other income you have. This single decision is worth more careful thought than almost any investment choice you'll make in your sixties.
4. Could your first five years survive a bad market?
Advisors call it sequence-of-returns risk: a market drop early in retirement, while you're withdrawing, does far more damage than the same drop later. The question to answer now: if stocks fell 30% the year after you retired, would your plan bend or break? Having one to three years of spending in stable assets is the classic cushion.
5. What's your healthcare bridge and Medicare plan?
Retiring before 65 means bridging to Medicare — COBRA, a spouse's plan, or marketplace coverage — and that bridge can cost more than people expect. After 65, Medicare has premiums, gaps, and enrollment deadlines with real penalties. A retirement date that ignores the healthcare calendar isn't a date yet.
6. What will you withdraw, and from which accounts, in what order?
Traditional 401(k) and IRA money is taxed when it comes out; Roth money isn't; taxable accounts sit in between. The order you tap them changes your lifetime tax bill, your Medicare premiums, and how long the money lasts. You don't need to master the details today — you need to know that a withdrawal order should exist.
7. What happens if you live to 95?
Longevity is the risk that quietly multiplies every other one. A plan that works to 82 and fails at 92 isn't a plan — it's a countdown. Stress-test the long version of your life: inflation over three decades, a late-life care need, a surviving spouse living on the reduced benefit.
- If you can answer all seven: you're ahead of the vast majority of pre-retirees.
- If some questions made your stomach drop: that's not failure, that's information — and early information is the cheapest kind.
- Either way, the worst strategy is not looking.
Common questions
How much money do I need to retire?
There is no universal number — the honest answer is 'the amount that covers your monthly spending gap for as long as you might live.' That's why questions 1 and 2 come first: your spending and your guaranteed income define your number, not a headline figure.
Is it too late to fix things if I'm retiring in two years?
Two years is enough to meaningfully change the picture: catch-up contributions, adjusting the claiming age, trimming the first-decade budget, or working one more year each move the needle more than most people expect.
Sources
- Retirement Confidence Survey — Employee Benefit Research Institute
- 5 Ways Financial Planning Can Help (Modern Wealth Survey) — Charles Schwab
- Report on the Economic Well-Being of U.S. Households: Unexpected Expenses — Federal Reserve Board