How to Know if I'm on Track for Retirement

The sooner you begin saving for retirement, the more your money will grow. Figuring out how much you'll need to save, though, can be tricky. It's a good idea to periodically take stock of your retirement savings, especially as your eventual retirement date nears. The U.S. Department of Labor suggests 10 years from your projected retirement date is a good time to take a close look at your finances and potential retirement savings. Ideally, you'll consult a professional financial adviser to help you plan for retirement, but if that's not an option, you can use the following guidelines to help you determine if you’re on track for a comfortable retirement.

Step 1

Add up your current expenses and note if any of these will change once you retire. For instance, many people no longer have a monthly mortgage by the time they retire, though you’ll need to continue paying homeowners insurance and real estate taxes. You may have fewer clothing expenses or commuting expenses when you stop working. However, your health care costs may increase as you age, so that you end up spending more in this area than you did during your working years. The United States Department of Labor reports that most people need about 70 to 90 percent of their current income when they retire.

Step 2

Find out how much you can expect to receive from Social Security (see Resources) when you retire. The Social Security office provides an online retirement estimator you can use to calculate an estimate of your monthly benefits. This estimate assumes you’ll work to retirement age, earning about the same money you make now. You can look at the benefits you’ll receive both at age 62, as well as if you wait until your full retirement age.

Step 3

Determine how much you’ll receive from a pension. If you aren’t eligible for a pension, you can skip this step. However, if you worked for a federal, state or local government, or for a private sector job that provided a pension, contact the benefits department of your employer and ask for estimate of the monthly benefit you can expect to receive during retirement.

Step 4

Add together the Social Security estimate and the pension estimate. Subtract this amount from your estimated monthly expenses in retirement. The result is the amount you’ll need to make up with retirement savings.

Step 5

List all your retirement savings – IRAs, 401(k) and any other money you’ve set aside for retirement. Use the current value in these accounts. Multiply the total by a conversion factor that allows for growth of these investments over 30 years of retirement. The U.S. Department of Labor suggests using 30 years as an average, though the actual life expectancy of a man who retires at age 65 is 17 years, while a woman who retires at 65 can expect to live another 20 years. If you expect to retire very early, you may want to add additional years to your calculations. You can experiment with different conversion factors for different rates of growth. Multiply by 0.004216 for 3 percent growth, by 0.005368 for 5 percent growth or 0.006653 for 7 percent growth. This tells you how much monthly income you can expect from your savings over a 30-year retirement.

Step 6

Subtract your monthly income estimate from your expenses after Social Security and pension. The amount left is the amount you need to make up for with additional savings between now and the time you retire. Multiply this amount by the rate of return you expect to earn on your savings. The Department of Labor publishes a table showing multiplication factors, assuming various rates of return and rates of inflation. For example, if you expect to earn a 5 percent rate of return and for inflation to average 3 percent, you’d multiply the shortfall by .7520. Multiply this result by 360 – the number of months in 30 years – and you’ll arrive at the amount you need to save in order to be ready for retirement. If you've decided to use a number other than 30 as the projected length of your retirement, multiply by the number of months in that time span.


  • If you don’t want to use a shortcut for estimate the savings you’ll need for retirement, use an online retirement savings calculator (see Resources).

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