retirement readiness
An assessment of whether accumulated savings, income sources, and spending plans are sufficient to sustain retirement.
Example
“Her retirement readiness score of 72 indicated she needed to save more or plan to retire later.”
Memory Tip
READINESS — are the numbers there? Honest assessment before it is too late to adjust.
Why It Matters
Retirement readiness helps individuals determine if they can stop working and maintain their desired lifestyle without running out of money. Understanding your readiness level allows you to make informed decisions about when to retire, how much to save annually, and whether you need to adjust your spending plans.
Common Misconception
Many people assume that having a specific dollar amount, like one million dollars, automatically means they are retirement ready. In reality, retirement readiness depends on your expected lifespan, annual spending needs, inflation rates, and income sources like Social Security, making the required amount different for each person.
In Practice
Consider a 60-year-old with 500,000 dollars in savings, expecting to live to 90, and planning to spend 40,000 dollars annually. After accounting for Social Security income of 20,000 dollars per year, they need their savings to cover 20,000 dollars annually for 30 years, which totals 600,000 dollars. This person is not quite retirement ready and might need to work a few more years or reduce their spending plans.
Etymology
Modern retirement planning concept — measuring preparedness for leaving the workforce.
Common Misspellings
Get a free financial plan from a real advisor
Related Terms
More in financial planning
Other financial planning terms you should know
See Also
Need financial definitions?
Clear definitions for 2,500+ finance, insurance, and investing terms.