Retirement Planning Helps Americans Assess Financial Readiness

Americans are increasingly considering later retirement as concerns about financial security grow, but financial advisers say careful planning can help workers determine when they can afford to stop working. A January 2026 survey by the Employee Benefit Research Institute found that confidence in having enough money for a comfortable retirement fell to 61%, down 6 percentage points from 2025.

The survey included more than 2,500 Americans and found that workers increasingly expect to retire later or continue working during retirement. Although the median expected retirement age remained 65, nearly one-quarter of workers changed their target retirement age in 2025, with most postponing it.

Financial advisers emphasize evaluating anticipated spending, available savings, retirement income, taxes, and health care expenses rather than automatically extending working years.

"Remember, retirement planning is less about working as long as possible and more about knowing when you have enough to support the life you want to lead," said Rose Faye, director of financial planning for Edelman Financial Engines.

Faye said understanding existing investments and retirement resources is an essential starting point. According to an Edelman Financial Engines survey, only four in 10 Americans know how their 401(k) is invested, despite the importance of retirement savings to long-term financial security.

She also highlighted how decisions about Social Security claims and retirement account withdrawals can affect income, taxes, health care expenses, and financial stability.

"It's important to start with a clear picture of your financial situation, yet many Americans don't have that visibility," Faye said.

Social Security claiming decisions can significantly influence retirement income. The full retirement age rose to 67 in 2026 for people born after 1960, while eligible workers can begin claiming benefits at 62 with reduced payments. According to the Social Security Administration, delaying benefits beyond full retirement age increases payments by 8% annually until age 70.

Continuing to work while collecting Social Security before full retirement age can temporarily reduce benefits. In 2026, the annual earnings limit is $24,480, with $1 in benefits withheld for every $2 earned above that threshold. In the year a beneficiary reaches full retirement age, the limit rises to $65,160, with $1 withheld for every $3 earned above it, counting earnings only through the month before the birthday.

After reaching full retirement age, beneficiaries can earn any amount without reductions to their Social Security payments under the earnings test. However, additional income can affect taxation. Wages, withdrawals from non-Roth retirement accounts, and annuity income can contribute to combined income, potentially making up to 85% of Social Security benefits taxable.

Medicare costs also depend on income. Americans generally become eligible at 65, and premiums reflect modified adjusted gross income from two years earlier. Depending on income, additional earnings can increase standard Medicare Part B premiums by 40% to 240%.

"You will generally still pay Social Security and Medicare payroll taxes on earned income," Faye said.

Retirement account withdrawals can create further tax obligations. Faye said distributions from traditional 401(k) plans and individual retirement accounts generally count as taxable income, while required minimum distributions can increase taxable income later in life.

"Withdrawals from tax-deferred accounts, such as traditional 401(k)s and IRAs, generally create taxable income," Faye said. "Required minimum distributions, the withdrawals you must take from certain retirement accounts later in life, can increase taxable income as well...therefore, which accounts you withdraw from, and when, can matter just as much as how much you withdraw."

Whether to delay retirement depends on how another year of employment would affect a person's financial plan.

"If working another year materially improves the sustainability of the plan or closes a meaningful income gap for you, that circumstance can support postponing retirement," Faye said.

Common retirement planning guidelines include saving approximately 10 to 12 times one's final annual salary by age 67 and targeting annual retirement income equal to 70% to 80% of pre-retirement income. Another approach is the 4% rule, which starts with withdrawals equal to 4% of retirement savings in the first year and adjusts that dollar amount for inflation annually.

A related calculation estimates anticipated annual spending that must be funded by investments and multiplies that amount by 25. These guidelines offer planning benchmarks rather than guarantees that savings will last throughout retirement.

Health insurance and long-term care expenses are also important considerations before leaving the workforce. An Edelman Financial Engines study identified retirement health care and long-term care planning as the leading unmet need among people who work with financial professionals.

"Medical expenses can increase significantly as we age, and long-term care can be a burdensome expense for retirees who aren’t financially prepared," Faye said.