“Am I actually ready to retire?”
We hear this question all the time from families. They’ve done the saving. They’ve been careful. And now they’re staring at a date on the calendar wondering whether the number in their account is the whole story.
It isn’t.
Instead of a single calculation, retirement readiness is a set of questions, and the honest ones are harder than the math.
Here’s how we think about it with the families we work with at The Baker Team.
Question 1: Do You Have a Reliable Income Plan, Not Just a Balance?
A retirement account balance tells you what you have. It doesn’t tell you what you can spend, for how long, or how your portfolio can hold up if the first five years of retirement happen to be rough ones.
This conversation is vital for families within a few years of their retirement date.
The account statement is just a starting point. What we’re actually working through: where is the income coming from, which accounts do you draw from first, and what happens to that plan if the market drops 30 percent the year after you retire?
That last scenario has a name: sequence-of-returns risk, and of all the things that can go wrong in retirement, it’s one of the few you can prepare for in advance. That’s why we want the income plan in writing. A lot of families come to us with a healthy balance and no instructions attached. Nothing on paper that says what happens if the first few years are rough. The money is real. The plan is the part that’s missing.
Question 2: Have You Stress-Tested the Plan, Not Just the Average?
Retirement calculators typically show you an average. Average return, average market, average outcome. Averages can be reassuring and also misleading.
Two retirees with identical savings and identical withdrawal rates can end up in very different places based solely on when their poor returns showed up. If your projections assume things go smoothly, try stress-testing against years that didn’t.
We run this kind of scenario planning with the families we work with. Not to scare anyone, but because a plan built around realistic possibilities may hold up better than one built around an optimistic average. Scenario analysis cannot guarantee future outcomes or prevent losses.
Question 3: Is Healthcare Covered?
If you’re planning to retire before 65, this question might catch you off guard.
Even at 65, healthcare is an ongoing expense in retirement. Long-term care costs, supplemental coverage, and out-of-pocket expenses for a 25-to-30-year retirement deserve a line item in any serious income plan.
If you don’t know what your healthcare costs look like from your retirement date to 65, or from 65 onward, strongly consider closing that gap before you give notice.
Question 4: Have You Thought Through the Tax Picture?
Most people spend 30 or 40 years building wealth in tax-deferred accounts. The distributions from those accounts are taxable. The order you draw from them, when you convert them, and how you coordinate them with Social Security can affect your tax bill in retirement.
Roth conversions, withdrawal sequencing, and Social Security timing are planning decisions that may affect how much of your savings you keep after taxes, depending on your circumstances.
Starting this conversation years before you retire, rather than the week before, may give you more time to evaluate the options available to you.
Question 5: Are You Emotionally Ready?
This one gets skipped in most financial checklists, and it probably shouldn’t.
For people who have worked for 30 or 40 years, retirement can feel like stepping off a cliff into something undefined. That’s normal.
But it’s a good idea to ask yourself:
- Do I have a sense of what my days can look like?
- Do I feel ready to step away from the structure and identity that work provides?
- Is my spouse or partner aligned with me on what retirement actually looks like day to day?
Although these aren’t financial questions, they shape financial decisions. Retiring before you’re emotionally ready can show up financially. Some retirees spend more in the early years, some make reactive investment decisions out of restlessness, and some return to work or consulting in ways that change their income picture.
None of that is necessarily bad, but it’s worth thinking through.
So, Are You Ready?
Retirement readiness is less of a finish line and more of a set of answered questions. The financial ones (income, taxes, healthcare, market resilience) and the personal ones (purpose, alignment, timing) all matter.
Are you within five to ten years of your target retirement date and haven’t stress-tested your income plan? Or are you not sure where to start? That’s exactly the kind of conversation we invite you to at The Baker Team.
No pressure, just a clear look at where your plan stands and what, if anything, deserves more thought before you make the call.
Schedule a complimentary 15-minute call with our team by calling (972) 502-9340, emailing jackson.baker@parkwayteam.com, or booking online here.
Frequently Asked Questions
How do I know when I have enough money to retire?
You may be ready when your reliable income sources cover essential expenses and your portfolio can sustain withdrawals across a 25-to-30-year+ horizon, including a stress test for a poor sequence of early returns. Key signs: Social Security + other income covers your floor; you have 1-2 years of cash reserves, and your withdrawal rate has been tested against down markets, not just average ones. The balance alone isn’t the answer.
What is the biggest financial mistake people make when retiring?
One of the most common mistakes we see is retiring without a written income plan that accounts for sequence-of-returns risk, the danger of poor early market performance while withdrawing funds. Many retirees over-rely on average return projections, which can look promising on paper but fail under real-world conditions. Retiring without a tax-efficient withdrawal strategy is another common one.
Can I retire at 62 if I have $1 million saved?
Possibly, but $1 million at 62 requires careful planning. You need to bridge healthcare costs before Medicare at 65, think carefully about your Social Security timing, and sustain withdrawals for potentially 30+ years. The Baker Team works with pre-retirees to stress-test exactly this scenario.
What questions should I ask a financial advisor before retiring?
Ask: Is my income plan stress-tested against a bad early market? What’s my tax-efficient withdrawal order? How do I bridge healthcare before Medicare? What’s my plan if I live to 90? How does Social Security timing affect my lifetime income? The answers should walk you through the scenarios that make sense for your specific situation, not just averages.
How do I create a retirement income plan that lasts 30 years?
Retirement income plans often draw on three types of sources: predictable income (Social Security, pensions), investment income (structured withdrawals from your portfolio), and reserve assets (cash buffer for down markets). Many plans coordinate withdrawals across account types for tax efficiency and are revisited regularly as tax law, spending, and life circumstances change.
About Gavin
Gavin Baker is a financial advisor at The Baker Team (located in Plano and Nacogdoches, Texas), where he draws on his own experience alongside the multigenerational history of the practice to provide retirement-focused planning guidance for retirees and pre-retirees throughout Texas. Gavin is committed to a fiduciary standard and works with clients on retirement income planning, tax-aware distribution strategies, and sequence-of-returns risk. He represents the next generation of advisors within the family’s practice.
