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10 Steps to Make Sure You Have Enough Money to Retire

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One of the biggest worries folks have as they approach retirement is whether or not that they have enough money to retire.  Since the goal of this blog is to “Help People Achieve A Great Retirement”, it seems appropriate to address that worry with this step-by-step plan. 

Follow these 10 steps and worry no more.  They’re the steps my wife and I followed when we were making the decision on when to retire, and I’m confident they’ll serve you well as you make your decision. 

A word of warning:  This is a meaty post, but I’m convinced that this post will do more to prepare you financially for retirement than any single post I’ve written in the past 6 years.  I’ve invested significant time in writing it, and I strongly believe it will be invaluable as you prepare for retirement.  

This post will do more to prepare you financially for retirement than any post I've written in the past 6 years. I trust you'll find it of value. Click To Tweet

Disclaimer: I am not a financial professional, and none of this advice should be implemented without a detailed review of your specific situation.  These are the steps that worked for my wife and I, so please take them only as suggestions of a course of action which you can serve as an example for your consideration.  Your situation IS different than mine, and the steps I followed may not be appropriate for your situation.  

10 steps to make sure you have enough money to retire

10 Steps to Make Sure You Have Enough Money to Retire

I was honored when Tom Dickson invited me to appear as a guest on his Financial Experts Network.  As we talked about potential topics, I suggested something along the lines of how to ensure you have enough money to retire.  He liked the idea, and I built a presentation.  I’ll be presenting it to ~800 financial professionals next week (it’s even been certified, and they’ll receive educational credits for attending!). As I built it, I realized it was also a worthwhile topic for an article, and this post was born.  For the record, I spent more time writing this post than I did on the presentation.  You’re worth it.  Wink.

With that, here are the 10 Steps to Make Sure You Have Enough Money to Retire: 

1. Put on Your Game Face

First, recognize that retirement is, perhaps, the biggest financial decision you’ll make in your lifetime.  Take it seriously, and commit to doing the work required to make a sound decision.  To do it right, you’ll need to do some work.  Don’t wing it, and don’t be afraid to hire a professional if you’re uncomfortable doing the following steps by yourself.  Moving from years of accumulating your portfolio to withdrawing from those savings in retirement is a major shift.  Don’t take it lightly.  Game face on?  Ok, let’s move to Step #2.

2. Design Your Dream Retirement

It’s important to remember that you’re trying to determine if you have enough money to retire.  Before you can answer that question, you need to get a realistic estimate of what your retirement will cost.  That cost will be driven in large part by the type of retirement you’d like to design for yourself.  Before you start cranking on the numbers, take some time to think about what you want your retirement to look like.   How much do you want to travel?  Where do you want to live?  Are you going to downsize?  Are you going to do more entertainment with that increased free time?  Dream for a few weeks, and talk with your partner.  Decide what your priorities are going to be, and keep them in mind as you work through the next few steps.

As I cited in my book, Keys to a Successful Retirement, there is a proven correlation between the amount of time one spends thinking about retirement and the success of their transition into that retirement.  Consider this step an investment in your future.  Dream about retirement.  It’s coming, and you’ll be well served by the time you invest thinking about it before it becomes a reality.

3. Track Your Current Spending

Remember Step #1?  This is where that game face comes into play.  Sure, no one enjoys tracking their spending, but it’s an essential step in determining if you have enough money to retire.  Many folks don’t really know how much they spend in a year, but it’s impossible to determine when you can retire without a realistic estimate of your spending. 

In our case, we tracked our actual spending for a year.  I strongly encourage this approach.  Sure, it’s painful, but the benefits are worth the cost.  Download my free Spending Tracker, or build one yourself.  (Note:  If you choose to download my spreadsheet, just hit File/Make A Copy to save a version you can use for your numbers).

Once you’ve established a realistic baseline for your current spending, you’ll be in a much better position to estimate how that will change once you retire.

4. Forecast Your Retirement Spending

I’ve said before that “retirement is a math problem”.  To complete the formula, you need to eliminate as many of the “x’s” as possible in the equation.  One of the biggest unknowns is your retirement spending, but that doesn’t mean you should ignore it.  Quite the opposite, since the answer to whether or not you have enough money to retire is driven, in large part, by what you expect to spend in retirement.

Starting with the details you’ve collected in Step #3, go through each spending category and estimate how it will change based on the retirement you’ve designed in Step #2.  Here’s an example:

A few things to think about as you work through this one:

  • Don’t forget health insurance.  It’s a critical cost item, and could be a major expense (especially if you retire before you’re eligible for Medicare). We estimated $2,500/month for our private health insurance, and our actual cost has come in at $1,900/month in retirement. 
  • Plan conservatively (on the high side of spending).  It’s better to have surprises to the good than the bad, as our health insurance example above illustrates.
  • Don’t forget taxes, especially if you’re planning on doing Roth Conversions prior to getting hit with Required Minimium Distributions.  We’re doing annual conversions up to the top of our marginal tax bracket, and it’s worked well for us.  Fortunately, we built the annual tax burden into our retirement spending forecast.

Finally, it’s valuable to build a model that shows your spending over the duration of your retirement.  You can use my free Retirement Cash Flow model as a template, or build your own.  (Note:  If you choose to download my spreadsheet, just hit File/Make A Copy to save a version you can use for your numbers).

Your spending will change over time (e.g., less travel as you age, but more health care expenses), and it’s helpful to look at your retirement spending over time to ensure you have enough money to retire, and stay retired. 

For the sake of this example, let’s assume you’ve completed the work and have arrived at an estimated “Year 1  spend” of $60k in retirement.  We’ll use this example in future steps.

5. Calculate Your Net Worth

Understanding your net worth is a critical foundation for your retirement planning.  When determining if you have enough money to retire, you must understand how much money you have to fund your retirement.   In short, the Net Worth statement details all that you own (your Assets), and all of the debt you owe (your Liabilities).  Subtract the liabilities from the assets, and you’ll calculate your net worth.  In Step #6, we’ll calculate how you can use your net worth to fund your retirement.

An example of a Net Worth statement is below, copied from my free Net Worth Statement.  (Note:  If you choose to download my spreadsheet, just hit File/Make A Copy to save a version you can use for your numbers).

net worth statement example

In the above hypothetical example, you’ll see a net worth of $519,500 on 12/31/20, with an increase to $756,500 by 12/31/23 based on projections for the next three years (this will be used as our example in the next steps)

It’s also helpful to know what the tax status is of the various holdings in your portfolio.  Our example shows $257k in 401(k) Pre-Tax accounts as of 12/31/20.  It’s important to note that you’ll have to pay the taxes out of that $257k before you can spend what’s left. The Net Worth statement will show you that and must be completed to determine if you have enough money to retire.  

6. Determine Your Safe Withdrawal Rate

Now that you know your Net Worth from Step #5, how much of those assets can you safely spend each year?  The Safe Withdrawal Rate is a critical element in your retirement planning and helps guide you in determining how much you can safely spend.  There is a ton of material available on various historical studies (the Trinity Study is the most well known), but I’ll summarize my opinion as this:

“A retiree should plan on withdrawing between 3 -4% of their retirement assets per year”

Where you fall in that range depends on a lot of variables (risk tolerance, age, asset allocation to name a few), but as a general rule of thumb (ugh) you should think of 4% as a more aggressive plan, whereas 3% would be a more conservative approach.  To keep it simple, I like to look at both ends of the range, and consider them as “guardrails” for my annual spending range.   It’s worth noting that SWR theory argues that you can increase your withdrawals by the amount of inflation per year.

Once you’ve completed your Net Worth, it’s simple to add a few lines to calculate your initial Safe Withdrawal Rate.  In our case, we subtract assets we’re not willing to spend in retirement (e.g., cars, equity in our home, though you could include some home equity if you’re planning to downsize).  I simply subtract “Non-Spendable Assets” to calculate “Spendable Retirement Assets”, which I then multiply by 3%, 3.5%, and 4% to calculate the annual spending our Net Worth can support, as shown below:

calculating your safe withdrawal rate

In this hypothetical example, the retiree could safely spend between $10,635 and $14,180 (with a midpoint of $12,408) based on their net worth as of 12/31/20.  Projecting forward, the midpoint increases to $19,268 by 12/31/23.   We’ll use these midpoint figures as examples in the following step.

7. Estimate Your Retirement Income

Now that you have a realistic estimate for how much income you can count on from your investments, it’s time to add the other income sources into your planning to see how your retirement income compares to your expenses.  This is the ultimate test for whether or not you have enough money to retire, so make sure you get your numbers as accurate as possible.

It is reported that 50% of workers don’t have a good estimate of their future Social Security benefits.  Don’t be one of them.  Simply log in to SSA.gov and use your actual numbers.  SS is a critical component of your retirement income and one that you don’t have to guess.  You have to decide at what age you’ll claim your benefits, but the SSA site will provide the information at various claiming ages.  Add the appropriate SS figure into your retirement income benefit.  If you’re retiring before you’re eligible, include it in the multi-year cash flow forecast for the year you plan to start your benefits.

After you’ve completed your Social Security estimates, continue the process for all other estimated sources of retirement income.  If you’re planning on working part-time in retirement, make a conservative estimate to minimize the risk of a nasty surprise.  Include a pension if you’re fortunate enough to have one, as well as any annuities or other income streams you expect.  Include a line for the Safe Withdrawal Rate calculated in Step #6.

When completed, you’ll have the following summary, which compares your projected retirement income with the expenses you determined in Step #4 (note, I’ve used the midpoint SWR in the example below):

do i have enough money to retire

Based on this example, the hypothetical couple will need to wait to retire until they claim their Social Security in 2023 to ensure their projected income covers their projected expenses.  If they would prefer to retire earlier, they could either reduce their expenses, increase their part-time work income, or increase their withdrawal rate from investments (Note their income exceeds expenses in 2023, so there is some merit in considering exceeding the “safe” maximum of 4% for a year or two, assuming they reduce it post-Social Security).

7a. Run A Retirement Calculator

Now that you’ve estimated the required inputs, I’d encourage you to run a few retirement calculators to compare their results with what you’ve determined to be a realistic retirement date.  My favorites are New Retirement and Personal Capital (affiliate links, but I use both of these myself). 

In my opinion, New Retirement is the best retirement calculator (I wrote a detailed review here), and Personal Capital offers some great dashboards that not only estimate your retirement readiness but also help manage your asset allocation (I use it every year as part of my Annual Review – see Step #10).

8. Develop Your Retirement Drawdown Strategy

Moving from the “Accumulation Phase” to the “Withdrawal Phase” of life is a MAJOR adjustment.  For years, you’ve been adding to your portfolio (the Accumulation Phase).  When you retire, you’ll begin to make withdrawals.  Recognize the significance of that change, and prepare for it.

Before you actually retire, decide how you’re going to manage those withdrawals.  Develop a detailed plan, just like I did.  One year before I retired, I published Our Retirement Drawdown Strategy, and I’d encourage you to study that post as an example of the drawdown strategy you should create for your situation. That post is particularly valuable, as 21 other bloggers joined a “Blog Chain” at the end of the post with links to their own drawdown strategies (note a few of those bloggers no longer exist, so I deleted their links). 

This post is getting lengthy, so I’ll summarize the types of issues you should include in your drawdown strategy.  Please read my drawdown strategy for more details:

  • How to mitigate the Sequence Of Return Risk (a bear market shortly after you retire).
  • What your Asset Allocation should be as you enter retirement.
  • Whether annuities make sense for your retirement plan.
  • How you’ll access your pre-tax investments.
  • If, and when, you’ll make Roth conversions.
  • Tax optimization.
  • How you’ll establish your retirement paycheck. (e.g., The Bucket Strategy, see Step #9).
  • How you’ll handle unexpected expenses.
  • When you’ll claim Social Security (and your pension, if applicable).
  • How you’ll handle health insurance.
  • What you’re going to do about Long Term Care Insurance.

I encourage you to create a multi-year cash flow projection, showing how you’ll be withdrawing from your investments to fund your retirement, and what impact that will have on your portfolio over time. As I stated earlier, you can use my free Retirement Cash Flow model as a template, or build your own.  (Note:  If you choose to download my spreadsheet, just hit File/Make A Copy to save a version you can use for your numbers).

Getting mentally prepared for the transition to the Withdrawal Phase is one of the most important steps in determining if you have enough money to retire. A detailed Drawdown Strategy will help you visualize this transition, and go a long way in alleviating your worries about running out of money in retirement.

9. Develop Your Retirement Paycheck

One of the most popular posts I’ve ever published is “How To Build A Retirement Paycheck From Your Investments”.  In it, I laid out all of the details of how we were positioning our portfolio to provide a “paycheck” in retirement.  In short, we’re using the Bucket Strategy, where 3 virtual buckets are used to designate which investments you’ll be using in various time frames to fund your retirement (e.g., Bucket 1 is 3-5 years of cash, designed to protect against Sequence of Return Risk).

I’ve since expanded on that original post with two additional posts which have shown how I’m “managing the buckets” in retirement. In my book, I dedicated a chapter to the issue, titled “What to do When The Paycheck Stops”).  Yes, this is important stuff.  Don’t retire without setting up your “paycheck” strategy. 

Due to the length of this post, I’ll avoid rehashing the entire strategy here.  If you’re interested in reading the details, links to The Bucket Strategy Series are below:

the bucket strategy

The Bucket Strategy Series:

While the bucket strategy is far from the only strategy to set up your “retirement paycheck”, it’s critical that you think through various issues regardless of what strategy you decide to implement, including: 

  • How to ensure you stay within your Safe Withdrawal Rate limits.
  • How you’ll avoid Sequence of Return Risk, especially in the early years of retirement.
  • When you’ll rebalance your portfolio to maintain your targeted Asset Allocation.
  • How you’ll manage “lumpy” spending.
  • How you’ll offset the impact of inflation over time.
  • How you’ll respond if the market declines, or improves.

10. Implement An Annual Financial Review

Finally, it’s important to remember that your retirement will (hopefully) continue for years. As you move through your retirement years, you must implement an annual review to ensure you’re staying on track.  I do one every year, and it takes me less than 2 hours.  I’ve outlined all of the steps I take in A Step-By-Step Guide For Your Annual Financial Update, including a free checklist which you can save by clicking that link.  In summary, my annual review consists of the following steps:

The Annual Financial Update Checklist:

  1. Update Your Net Worth
  2. Capture Your Current Asset Allocation
  3. Determine Portfolio Rebalancing Actions
  4. Update Your Bucket Status
  5. Update Your Spending for the Previous Year
  6. Establish Your Spending Limits for the New Year

Having an annual routine helps ensure you maintain your safe withdrawal rate and don’t spend more than you’re able to afford.  You should also consider expanding your annual checklist to update important estate documents, double-check your beneficiaries on all financial accounts, etc. You can customize your annual review to cover the items of importance to you, but you can’t safely retire without having a system in place to ensure you’re staying on track.


At 3,200 words, this is one of the longest posts I’ve written in 6 years of blogging.  Hopefully, you’ve found it to be one of the most valuable.  And to think, I could have easily summarized it with one picture:

steps to have enough money to retire pinterest

Your Turn:  For those of you who have successfully retired, what did I miss?  For those of you who are thinking of retirement, are you ready to put your game face on?  What questions do you have that weren’t covered in the article?  Let’s chat…


  1. This might be your most comprehensive post ever Fritz!

    Love your 10 steps and how they outline achieving financial security. What interests me most is Step 2 where you mention planning your “dream retirement”. Something important that I strive for in my blog.

    From my perspective, achieving financial independence is but the bedrock of retirement. It allows us to sleep soundly at night. What it doesn’t do is provide purpose and a reason to wake up each morning. This is why thinking about your dream retirement becomes so important.

  2. Great article and visual and I love the tools. I plan on using to augment our work with our financial advisor. I was curious when you track spending; do you have items that are charged monthly to your credit card (cell phone bill, Insurance, etc.) counted in the budget under their own line item or under the credit card bill? Sometimes we set this up for convenience and also to earn points.

  3. This needs a much deeper dive, but with a quick run thru this is excellent advice. Thanks.

    p.s. love your office and workshop

  4. Fritz, I simply follow you on your bucket planning and what a simple great way you have explained this my friend. This post takes this to a new level. Thank you so much. Regards Procyon

  5. This is great. Even though the hubs and I are going to have a “modest” retirement, I’ve been reading and working on our plans, budgets and income for several years. We fortunately still have time to get our retirement on a better track and certainly things have gotten better the last two years. Your advice has been very affirming and helpful in getting us to where we are currently at on our journey.

    I’ve read through this once and have bookmarked so that I can go through it again during my vacation. Yes, vacation is a great time to review retirement plans, accounts, budgets, etc.

  6. Awesome post as usual. I feel good knowing that I’ve done every single one of these things. Weather successfully or not I guess we’ll find out!

    And don’t worry I didn’t think your post was too long. It was appropriate length given the content!

    1. As usual? You’re too kind. Thanks for reading through the entire post, glad to hear it’s aligned with the path you followed. I suspect you’ll have a great retirement, whether you got there “accidently” or not!

  7. Thanks for the reminders. We bought your book “Keys to Successful Retirement” last year. We are about 2.5 years from retirement been following most of the 10 steps you outlined here.

    We are tracking our monthly income versus monthly expenditures and will track till retirement. The monthly expenditures are way below the income. 2020 was a different year with no travel and lockdowns. 2021 is only partial opening since we are in May and things are just opening up. We will have to wait till 2022 to get the real numbers.

    We are already planning on the Roth Conversion and draw down in retirement so we can figure out what we can spend on leisure activities. So much to do, so little time. ha ha.

  8. Fritz, Thank you for taking the time to put all these resources in one blog post. It may be an all time favorite. We retired late Fall 2019 and worried about the sequence of returns in March 2020. Even if the market would have stayed down, our 50/50 to 60/40 portfolio would have been fine combined with our cash bucket. I worried about losing some potential returns with the cash bucket, but the peace of mind is priceless. Thanks for your sage advice and insights.

    1. “It may be an all time favorite.”

      I could ask for nothing more. I agree sequence of return risk is a big concern in the first few years of retirement, we’ve been fortunate thus far! And, I agree with you that the peace of mind is worth a bit of lost opportunity, at least for me.

  9. Fritz – One thing I noticed when I recently checked on SS estimates is they have updated their info to allow you to project income from now to full retirement age. I used to max out SS payments, but no more. The old projection assumed I would earn the max until age 67. Now you can input a reduced earnings level if you intend to work down before stopping. Very nice improvement to their estimate tool.

  10. Fritz, I loved this post (even more than your bucket post). I had to print this to share with husband. Lots to digest, the more I understand the more excited and ready I feel—2 years and counting to the starting line!
    Thanks so much, Karen

    1. I hope you found that handy little “print” button up on the top – I added that at the request of a reader, makes it a lot easier to print out a post! Thanks for the kind words, best of luck on your final jog to The Starting Line!

  11. Great step by step guide on making sure you have enough money to retire. I’m not quite there yet myself but it’s not too far off on the horizon and I am needing to get more serious about planning and preparing for drawdown strategy, etc. You mentioned the shift from accumulation phase to drawdown is a major one. I imagine it is major both in terms of the actual mechanics (taxes, how you will generate a “paycheck”, etc.) and even more so, psychologically. Kind of the equivalent of climbing a mountain your whole life and then finally reaching the cliff’s edge and jumping off. The steps you outlined will help people realize that it’s not as scary of a jump as it may seem.

    1. I love your nic! You may not be there yet, but it will happen before you know it. Nose to the grindstone until you cross The Starting Line. Life without weekdays is a great way to live! And yes, the transition from accumulation to withdrawal is a bit like climbing a mountain, though I prefer the hang gliding analogy vs. “jumping off”….wink.

  12. Great post. Very high quality content.
    I’ve been tracking my spending for twenty years and never thought of forecasting my Non-W-2 years using this data.
    What are the variable “watch outs” beside health care and Travel that I should be considering five or ten years out?
    (Never mind inflation for the first few passes.)

    1. “Very high quality content.”

      Always my goal, Francis. Sometimes I hit it better than others. Thanks for the compliment on this one, I sincerely believe it’s one of the most helpful I’ve written, glad to see others agreeing in the comments.

      As for “watch outs”, I’d add taxes to your list. Most folks don’t appreciate how much it changes when you have to estimate and pay your own taxes out of your investments/SWR, especially if you’re also planning Roth conversions. And…entertainment since you’ll have more time to slow down and enjoy a nice meal.

  13. Fritz- Awesome stuff that I plan to share with our voluntary employee wellness group as a nice addition to what’s outlined in your book I’ve been giving out! Thanks for what you do in putting this in a neat and easy to read format.

    On a personal note, thanks for the Roth conversion hyperlink you embedded. I swore I was going to teach myself that this year based on what you outlined in the book since I believe in how important that is. I plan to print it today as a guide and get on it.

  14. Hi Fritz, apparently your commitment to writing less has put you into a relapse phase! I really enjoyed your article, as I have enjoyed all of your past articles that you made reference to. You have put an amazing amount of research into the field of personal retirement health and I sincerely appreciate your taking the time to share it with your audience.

    I have followed a similar path, although I use different terminology, and my organizational skills run more toward bar napkin than spreadsheets. And, like you I always viewed retirement pretty much as a math problem. The importance of the annual review cannot be over stressed, it’s what keeps you on track.

    Keep up the great work, a lot of people including me, benefit greatly by the insights you provide on retirement. Thank you!

  15. This is a really great post Fritz! Definitely not too long. Keep up the great work! I retired four years ago at age 69, and essentially followed your plan. We have always tracked our spending—every dollar, every day, we projected retirement income and spending, tracked our net worth, determined our asset allocation in retirement, and created a bucket plan for drawdowns and RMDS. It has been great so far!

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