Are You Really Ready to Retire? The Three Numbers That Will Tell You

Imagine this: You retire after 30 or 40 years of hard work, eager to finally enjoy the freedom you’ve earned – only to discover you miscalculated. Your retirement income doesn’t quite cover your expenses. You find yourself dipping into savings faster than expected, and eventually, you’re forced back to work. Not because you want to, but because you have to.

This is one of the most heartbreaking outcomes we see in financial planning, and it happens more often than it should. Fortunately, it’s avoidable with the right preparation.

Here at The Noble Group, we’ve spent decades helping clients retire confidently. And, to help build that confidence for yourself, you can calculate three personalized retirement numbers. By the end of this article, you’ll know whether you’re on solid footing or need to adjust course before making one of life’s biggest transitions.

Let’s break down these three key numbers, and why they matter more than any one-size-fits-all savings benchmark.

I Need $2 Million to Retire? Maybe Not.

If you’ve Googled anything about retirement planning, you’ve probably come across articles and self-proclaimed experts pushing generic metrics, things like “you need $2 million” or “10x your salary” to retire comfortably. While those figures might serve as good general rules of thumb, they completely miss the mark when it comes to your individual situation.

Why? Because your retirement lifestyle, expenses, income sources, and tax burdens are all unique. The better question isn’t “how much should I save,” but rather…

What does retirement actually cost me, and how will I pay for it?

Let’s walk through this process using the example of a hypothetical client couple, Jim and Katherine, whose situation is built from real-life planning scenarios we’ve helped clients navigate.

Number One: Your Retirement Expenses

Your first number is how much you plan to spend each month or year in retirement. That may sound obvious, but many people either underestimate this number or overlook major factors when estimating it.

Step 1: Define What Retirement Looks Like

Before calculating anything, take time to think about your goals and your vision for retirement. This will directly impact your expenses. Ask yourself:

• Will I travel more often or further?

• Am I downsizing, or keeping the family home?

• Will I buy a vacation property?

• How often will I dine out, shop, or entertain?

• Will I be supporting causes, family members, or giving to grandkids’ college funds?

These answers aren’t just nice to know: they form the basis of your budget.

Step 2: Calculate Retirement Expenses (Two Options)

Option A: Build a Retirement Budget from Scratch

This is the classic, line-item approach. You map out everything from healthcare premiums to hobbies to home improvement projects. It’s extremely thorough, but it can be incredibly time-consuming and hard to project accurately years in advance.

Option B: Adjust Your Current Take-Home Income

This is a faster, reliable method for many people. Here’s how it works:

1. Start with your current monthly take-home income (after tax and savings).

2. Subtract any expenses that will go away in retirement (mortgage, kids’ expenses, savings).

3. Add new expected retirement expenses (travel, leisure, hobbies, etc.)

Let’s see this in action with Jim and Katherine.

Case Study: Jim & Katherine’s Retirement Expense Number

• Current monthly income (after tax/savings): $12,000

• Expenses ending at retirement:

  • $3,000 mortgage (paid off at retirement)

  • $1,000 monthly saving to investments/kids’ 529s

  • Subtotal removed: $4,000

• New retirement expenses:

  • $1,000/month for travel and personal enjoyment

  • Subtotal added: $1,000

So, Jim and Katherine’s expected retirement lifestyle expenses come to:

$12,000 – $4,000 + $1,000 = $9,000/month

This is the first critical number. They now know they need $9,000 hitting their bank account every month to live their ideal retirement.

Number Two: Your Retirement Income

Now that we know their anticipated expenses, it’s time to look at their predictable, reliable income sources in retirement.

Important note: When we say “income,” we’re not referring to withdrawals from savings. We mean guaranteed or near-guaranteed income sources like:

• Social Security

• Pension income

• Rental income (net of expenses)

Again, don’t include investment withdrawals here. We’ll cover those later.

Let’s see what this looks like for our couple.

Jim & Katherine’s Income Sources

• Pensions: None

• Rental income: None

• Social Security (combined): $5,500/month

So their total retirement income is $5,500/month.

Now we subtract this from their retirement expenses:

$9,000 – $5,500 = $3,500/month

That $3,500 is their income shortfall – the gap that must be filled from their personal savings and investments.

Number Three: Your Retirement Savings Need

To calculate this number, we’ll work backward using a planning rule known as the 4% rule.

The 4% rule suggests that if you withdraw 4% annually from your retirement portfolio, your money should last 30+ years, even through market volatility. It’s not perfect, but it’s a widely used benchmark for safe withdrawal rates. You can check out our short video that goes more in-depth with this rule here.

To find the amount you need in savings:

1. Take your annual income shortfall

2. Divide it by 0.04 (aka 4%)

Jim & Katherine’s Calculation

• Monthly shortfall: $3,500

• Annual shortfall: $3,500 × 12 = $42,000

• Target savings: $42,000 ÷ 0.04 = $1,050,000

At this point, $1,050,000 seems like their magic number. But, there’s one more critical piece…

Don't Forget: Taxes Can Change Everything

A common mistake is to ignore how taxes reduce your withdrawals. Most people have a sizable portion of their retirement savings in tax-deferred accounts like 401(k)s and traditional IRAs. Withdrawals from these accounts are taxed as ordinary income.

In Jim & Katherine’s Case…

Let’s assume they’ll be in a 20% tax bracket during retirement. That means to net $3,500 per month, they’ll need to withdraw more than that – because only 80% of their withdrawals will actually hit their bank account.

Here’s the math:

• Net need: $3,500/month

• Tax-adjusted withdrawal: $3,500 ÷ 0.80 = $4,375/month

• Annual need: $4,375 × 12 = $52,500

• Revised savings goal: $52,500 ÷ 0.04 = $1,312,500

That tax impact increases their savings need by over $250,000.

The Final Check: Are You There Yet?

After crunching the numbers, Jim and Katherine can ask confidently as themselves: Are we financially prepared for the retirement we want?

If your savings don’t line up with your calculated number, don’t worry – it doesn’t mean retirement is off the table. It just means you may need more time to save or explore strategies that reduce taxes, optimize Social Security, or adjust spending goals.

Retirement Isn’t Just About One Number

It’s easy to think retirement readiness is about “hitting a number.” But it’s not just one number; it’s three:

1. Retirement expenses

2. Retirement income

3. Retirement savings (tax-adjusted)

Together, these can give you a complete, realistic picture of your retirement landscape.

Okay, I’ve Calculated My Numbers. What’s Next?

Calculating these three numbers is a great start to the retirement planning process – but it just scratches the surface.

At The Noble Group, we specialize in personalized retirement strategies based on your goals, your income sources, and your tax situation. Whether you’re five years away or thinking about retiring next month, we’ll help you develop a more nuanced plan.

Email us today at education@thenoblegroup.com to schedule a complimentary retirement review and to take the next step toward the retirement you’ve earned.

This is a hypothetical situation based on real life examples. Names and circumstances have been changed. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments or strategies may be appropriate for you, consult your advisor prior to investing.

This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.

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