Retirement is meant to be the reward after years of hard work—the time when you can finally pursue your passions and enjoy life on your own terms. But is reality going to live up to your dreams?

Many Americans find their retirement expectations don't match the reality. In fact, the 2024 Retirement Confidence Survey showed that only 68% of workers feel financially prepared to retire comfortably.

So, how can you ensure that you've covered all your bases? How can you know if you're truly retirement-ready?

What is "retirement readiness"?

Being retirement-ready means having the savings, income streams, and plans in place to maintain your desired lifestyle. This goes beyond having a certain amount in your retirement accounts.

Retirement readiness reflects your overall financial health and preparedness to thrive in your post-work years without money worries. Evaluating it takes a holistic look at your finances, not just your account balances.

How to assess your retirement readiness

As you approach retirement age, consistently evaluating your preparedness is crucial. Here are three assessments every pre-retiree should master:

Assessment Tool #1: Project Your Sustainable Withdrawal Rate

The 4% rule provides a guideline for how much you can safely withdraw from your retirement savings each year. Here's how it works:

• Add up all your retirement account balances to determine your total portfolio value.
• Multiply this amount by 0.04 (4%) to calculate your maximum sustainable withdrawal for year one.

For example, a $1 million portfolio allows up to a $40,000 first-year withdrawal.

• In future years, adjust your withdrawal amount upward to account for inflation. If inflation is 3%, in year two you could withdraw $41,200.

The 4% rule aims to provide steady lifetime income from your savings while preserving the balance. But several factors impact its effectiveness, like market performance and your personal situation.

Assessment Tool #2: Take Stock of Your Debt

Debt obligations impact how much you need to save and withdraw. To understand your situation, create a detailed debt inventory:

• List all debts (mortgage, credit cards, auto loans, etc.)
• For each debt, note the remaining balance, interest rate, and minimum monthly payment.
• Add up the monthly payments and divide by your gross monthly income to determine your debt-to-income ratio.

Financial experts recommend keeping this ratio below 36%. If it's higher, focus on paying down high-interest debts first.

Having an overview of your debt and associated costs will help you budget for retirement. Debt takes a bite out of your available income, so minimizing it provides more cash flow.

Assessment Tool #3: Identify All Sources of Retirement Income

Creating an income inventory helps ensure you have diverse, reliable income streams in retirement:

• List out all expected income sources, such as Social Security benefits, pensions, retirement account withdrawals, part-time work, rental income, annuities, and the like.
• Total your estimated monthly income and compare to your projected expenses. Look for shortfalls.

Having multiple income sources helps reduce over-reliance on any given one, providing a safety net if one falls through. For example, 70% of retirees depend heavily on Social Security. Make sure you have backup sources of funds.

Get Ready for Retirement with Savvly

This article has covered key assessments to evaluate your retirement readiness. But preparing for your later years goes beyond just assessments - you need a sound financial plan.

That's where Savvly comes in. Savvly offers an innovative solution designed to provide easy, affordable financial security in retirement.

Savvly is the world's first market-driven pension that can give you income for life at a fraction of the cost of an annuity. It's a new way to get additional funds in retirement when you need it most.

Ready to take control of your retirement? Try Savvly's free retirement planning calculator to see where you stand!

Survey: Your Retirement Readiness

Now that you've learned key assessments, it's time to check your preparedness. Take this quick survey:

On a scale of 1-5, how confident are you in your retirement preparations?

1 - Not very confident

2 - Somewhat confident

3 - Moderately confident

4 - Very confident

5 - Extremely confident

At what age do you expect to retire?

a) Before 60

b) 60-65

c) 66-70

d) After 70

e) I don't plan to retire

What worries you most about retirement planning?

a) Saving enough money

b) Managing investments

c) Healthcare costs

d) Maintaining my lifestyle

e) Other (please specify)

How often do you review or adjust your retirement strategy?

a) Monthly

b) Quarterly

c) Annually

d) Every few years

e) I don’t have a retirement strategy

What will be your main source of retirement income?

a) 401(k) or IRA

b) Social Security

c) Pension

d) Part-time work

e) Other (please specify)

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