How Do I Know If I Have Enough to Retire? A Framework for Phoenix Pre-Retirees

One of the most common questions I hear from people in their late 50s and early 60s goes something like this: "I think I'm close, but how do I actually know if I'm ready?"

It's a completely reasonable thing to wonder. You've spent decades saving, investing, and planning for a day that's finally starting to feel real — and yet the finish line can feel strangely unclear the closer you get to it. The honest answer is that "enough" isn't a single number. It's a question that has to be answered in context. But there is a framework I walk every client through, and I want to share it with you here.

Start with your income gap, not your account balance

The most common mistake I see pre-retirees make is fixating on their portfolio total — "Do I have enough in my 401(k)?" — rather than asking a more useful question: how much monthly income will I need, and where is it coming from?

Here's how I think about it. Start by estimating your retirement spending — what you actually need to live the life you're planning. Then identify your guaranteed income sources: Social Security, any pension, rental income. The difference between what you need and what those sources provide is your "income gap" — the amount your portfolio needs to fill each month.

That reframes the whole conversation. A $1.5 million portfolio looks very different for someone whose income gap is $2,000 a month versus someone whose gap is $6,000 a month.

Apply a sustainable withdrawal rate

Once you know your income gap, you can work backward to figure out how large a portfolio you need to fill it. A common starting point is the 4% rule — the idea that withdrawing 4% of your portfolio in year one, then adjusting for inflation each year, has historically supported a 30-year retirement without depleting assets.

I want to be careful here: the 4% rule is a rule of thumb, not a guarantee. Depending on your age, spending flexibility, and how markets behave in your early retirement years, the right withdrawal rate for you might be slightly higher or lower. But as a starting framework, it's useful.

A simple way to use it: multiply your monthly income gap by 12 to get your annual shortfall, then divide by0.04. That gives you a rough portfolio target.

For example: if you need $4,000 per month beyond Social Security, that's $48,000 per year. Divided by 0.04,you'd want roughly $1.2 million in investable assets. That's not a final answer— it's a starting place for a real conversation.

Don't forget Arizona's tax picture

If you're retiring in the Phoenix area, there's good news on the tax front. Arizona has a flat income tax rate, and the state doesn't tax Social Security benefits. That matters when we're doing income planning, because it affects how much of your retirement income actually stays in your pocket.

That said, federal taxes still apply to IRA and 401(k) withdrawals, and depending on your income, up to 85% of your Social Security benefit may be taxable at the federal level. This is one of the reasons I spend a lot of time with clients on tax strategy during the years just before retirement — there are often meaningful opportunities to reduce lifetime tax burden if you plan proactively.

Consider your timeline and your health

"Enough" also depends on how long your money needs to last. A healthy 62-year-old in Phoenix might realistically be planning for a 30-year retirement. That changes the math compared to someone retiring at 67. I encourage clients to plan conservatively on longevity — it's a much better problem to have too much left at the end than to run short.

Healthcare is another piece of this puzzle. If you're retiring before age 65 and not yet eligible for Medicare, you'll need to account for the cost of private health insurance. In Arizona, that can be a significant monthly expense depending on your age and health status, and it's something I want clients to plan for explicitly — not discover after the fact.

What "ready" really means

In my experience, the clients who feel most confident going into retirement aren't necessarily the ones with the largest portfolios. They're the ones who have a clear plan — who know where their income is coming from, understand their tax situation, and have thought through what they want this chapter of life to look like.

Retirement is a significant transition, and I believe it deserves careful, unhurried preparation. If you're somewhere in that five-to-ten year window before your target date, now is the time to start pressure-testing the numbers — not the week before you hand in your notice.

If you're asking the question "do I have enough?" and want to work through it with someone who will give you a straight answer, I'd be glad to talk.

Disclosure

The content of this post is for educational purposes only and should not be construed as personalized financial, tax, or legal advice. This is not an offer to buy or sell securities. No investment process is free of risk and there is no guarantee that the investment process described herein will be profitable. Investors may lose all of their investments. Past performance is not indicative of current or future performance and is not a guarantee. Investment advice offered through IHT Wealth Management, a registered investment adviser.