Most people measure retirement readiness by looking at their account balance, comparing it to a number they have in their head, and deciding whether they feel good or bad about where things stand. The problem is that while a balance tells you what you’ve saved, it says very little about whether you can actually live on that number.

Building a portfolio is different than turning a portfolio into a paycheck. The gap between those two things catches many pre-retirees and retirees off guard. At Credent, advisors use three measurements to assess whether a client’s income plan holds up under real conditions, such as fluctuating markets, shifting timelines, or life going sideways. 

Test #1: Income Stability

Start by identifying every income source that doesn’t move with the stock market: Social Security, pensions, annuities, rental income — any dollar that shows up regardless of what the market does that week. Add those up and compare them to your projected monthly spending.  

Ideally, sustainable income should cover at least 25% of what you’ll need to live on. This is a general benchmark, not personalized advice, and your specific situation may call for a different target. 

Regardless, when markets drop, having a reliable source of income means you won’t be forced to sell investments at the wrong time just to cover basic expenses. 

Bottom Line: If you’re below that 25% threshold, it’s worth considering whether any adjustments — like delaying Social Security — could improve that number before you retire. 

Test #2: Withdrawal Rate

Once you know how much you’ll need beyond steady income, the question becomes: how much can you pull from your portfolio each year without depleting it too quickly? 

A common planning benchmark for someone with a balanced mix of stocks and bonds is 4% to 5% annually. On a $1 million portfolio, that works out to $40,000 to $50,000 per year.  

The right number for you will depend on your age, your other income sources, and how much flexibility you have in your spending — but this range can anchor your planning assumptions. 4-5% annually is general guidance, so keep in mind that your specific situation may call for a different approach. (Want to personalize this % to your situation? Contact a Credent advisor to build your financial plan.)

Bottom Line: If you’re planning to withdraw significantly more than 5% annually, assess whether that choice will work long-term before you retire, not after. 

Test #3: Probability Score

A probability score is harder to calculate on your own, but it’s the most valuable of the three metrics. Old-school retirement calculators assumed your investments would grow at the same steady rate every single year. But markets don’t actually behave that way. 

Modern planning uses a Monte Carlo simulation, which runs your financial plan through thousands of different scenarios — including bad markets, high inflation, or other possible outcomes. The output is a probability score: how often does your plan succeed across all those scenarios? 

We aim for clients to land at 80% or higher. Setting the bar at 100% would push people toward such conservative spending that they’d systematically underuse the wealth they worked decades to build.  

An 80% score reflects a plan built to handle most everything that could impact your financial situation. It’s not a guarantee of any specific outcome, but it provides a meaningful indicator that your plan has been stress tested. 

Bottom Line: Test your probability of success and revisit your score regularly to confirm that your financial plan is still equipped to succeed, even after a change in your life or economic conditions.  

What These Tests Mean for Your Retirement Readiness

No single measurement provides the full picture. But when you look at your income stability, withdrawal rate, and probability score side by side, you have something far more useful than an account balance — you have a real assessment of whether your retirement income plan is built to last. 

Want to feel confident in your retirement readiness? Reach out to a member of our team using the form below. 

For more information about preparing for retirement, check out our article on “5 Foundational Ways to Minimize Retirement Anxiety”.