Planning to Retire by 2026's End? 4 Questions to Answer First

Key Points

• A solid retirement income strategy matters.

• You should know what will cover your healthcare costs.

• It helps to decide how you’ll spend your time.

If you’re hoping to retire by the end of 2026, you’re in the home stretch.

You may be spending the coming months preparing a replacement at work and getting your plans in order for the next chapter. Still, it’s worth confirming that you’re truly ready to leave the workforce. A good way to do that is to walk through these key questions.

1. How much annual income will my savings produce?

Even if you are still adding money to an IRA or 401(k), you should already have a clear idea of the balance you expect to retire with. From there, the next step is estimating how much yearly income that nest egg can realistically generate.

That begins with choosing a withdrawal rate. If your portfolio holds a roughly even mix of stocks and bonds, the familiar 4% rule may be a reasonable starting point. If your investments are more conservative, your withdrawal rate should be lower as well.

For example, if you retire with $2 million and apply the 4% rule, you might expect about $80,000 a year from your savings. The key is determining whether that amount, combined with your planned spending and any other income sources, will be enough.

2. When should I start Social Security?

Social Security can be a major part of retirement income even when you have substantial savings. If you were born in 1960 or later, full retirement age is 67, and that is when you can receive your full benefit amount without a reduction.

You may claim benefits as early as age 62, but filing before full retirement age reduces your monthly payments. On the other hand, waiting beyond full retirement age increases your benefit by 8% per year until age 70.

Knowing when to claim Social Security is important because it directly affects how much money you will receive each month. You can then combine that estimate with expected withdrawals from savings to check whether your income will cover your future expenses.

3. How will I handle healthcare?

Many workers lose employer health coverage once they retire. If you will be 65 or older at that point, you should be able to sign up for Medicare. If not, you’ll need another source of health insurance.

COBRA may be worth considering if you are close to Medicare eligibility and can manage the cost. It lets you keep your employer plan, but without the company subsidy, premiums can be very high. If you still have several years before Medicare begins, an ACA marketplace plan may be another option, especially if your income is low enough to qualify for a subsidy.

4. How will I fill my days?

You may be looking forward to no longer waking up early, commuting to the office, and dealing with traffic on the way home. But excitement about a slower pace does not mean you should avoid planning how you’ll spend your time before retirement begins.

Some retirees discover that too much free time can be harder to manage than expected. To avoid boredom, think about what you want life to look like once you are no longer tied to a 40-hour workweek. You might take up a new sport, volunteer, or work part-time.

As retirement draws near, it can feel like a final countdown. If you expect to end your career at year-end, the holidays may bring an added reason to celebrate. Just be sure to answer these important questions first so you do not face any major gaps in your plan.