Retire Confidently by Stress-Testing Your Budget While You're Still Working
If you’re in pre-retirement, the age close to stopping full-time work, you may be excited to travel when you want, visit family more often and live life on your own terms. However, with the freedom and flexibility of retirement come financial considerations and trade-offs, such as the need to adjust your spending. You may have a lot of questions.
Will you still be able to enjoy your current lifestyle comforts? Will your earnings allow you to continue investing to build wealth or will they be swallowed by a mountain of debt that makes life unaffordable?
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One way to zoom in on how life will look in your golden years is to pressure-test your retirement budget early as a trial run. Here’s how to test your retirement budget before you file for Social Security with strategies that can help you grow your nest egg.
Use the 4% Rule
If you’ve spent time browsing personal finance websites or forums, you’ve likely come across the 4% rule for retirement planning, a strategy for putting as much money as you can into savings. It works like this: You withdraw 4% from your total investments during your first year of retirement and adjust the withdrawal amount for subsequent years to account for inflation, according to Schwab.
“Right now," wrote Reddit user swissarmychainsaw, in recommending this strategy, "according to my calculations, I can make the same amount I spend today if I quit working. If I spend $95,000 per year, that's what my investments would bring in using the 4% rule."
“The 4% rule should be sufficient without having to do buckets. Buckets may help you sleep better, though," agreed Redditor JosiahMaple. The poster also recommended making a plan for your asset mix over the plus-or-minus five years around your retirement.
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Live on Your Pension (If You Have One) for a Year
Taking time to do a dry run for a short period, such as 12 months, provides a clear picture of whether you can afford to live as if you were retired. You may have to give up some comforts, though, such as dining at pricey restaurants, spending regularly on new clothes, hair and makeup services or food delivery and subscription services.
Reddit user Liz P said they survived on their pension for one year.
“I did a trial year," they wrote. "I lived ONLY on my pension and socked away all my salary into savings. At the end of the year, I realized I could do it.” Liz P said their house is now paid off and they bought a car with cash.
However, there are limits. The user wrote that they doubted they could live on just the pension with a mortgage or college expenses for kids. However, pensions and spending needs differ from person to person, so it may be a viable case for others.
Factor in Unexpected Healthcare Costs
As you age, healthcare expenditures can hit retirees hard. Redditor My_clever-name said unexpected expenses are the ones that drain a nest egg.
“Seven years ago, my mother was paying $5,300 a month for assisted living," they wrote. "That doesn't include other expenses like Medicare supplemental, Part D insurance premiums and the copays, emergency ambulances a couple times a year and routine wheelchair transport to and from doctors.”
They said healthcare costs made their mother run out of money.
Pay off Your Mortgage Early
Paying off your mortgage early can free up substantial money for your retirement. The average monthly mortgage payment in Sept. 2025 was $2,321, according to Rocket Mortgage. That’s nearly $30,000 a year. By paying off your mortgage and other debt with your earnings now, you’ll free up money for your retirement.
User GimletGal on the website Mumsnet noted that they tested early retirement by living on less, paying off their mortgage, contributing to an emergency fund and getting a part-time job.
“I picked retiring early and living on less. Paid off the mortgage early, saved up an emergency fund, then worked part-time for a year while living on my "retirement budget" to check it was doable.” They said they knew they were taking a risk.
“I’m seven years in and have no regrets,” they said.
Consider Retirement Planning Software
Sometimes having your earnings and investments on a spreadsheet isn’t enough to understand the big picture of how much money you’ll have to work with when you retire. Using retirement planning software can help people in pre-retirement calculate expenses more closely, so they can make better financial decisions, grow their money more efficiently and avoid losing money to taxes and fees.
Reddit user ResearcherNo9971 said they use Bolden software that lets them run various retirement scenarios.
“You can set it to see if you have enough, possible growth: Roth conversions, expenses, etc. It shows you the percentage of success per scenario at different levels of market growth,” they said.
They explained that the software allowed them to set the percentages for “optimistic, average and pessimistic scenarios,” which they said helped them see a clear rundown of different possibilities.
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This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal or tax advice.
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