Your retirement lifestyle will depend on how much you contributed to your individual retirement account or other retirement plan during your working years. To determine how much you will need in that IRA, first decide how much money you think you'll need each month during retirement. Where and how you plan to live have a lot to do with this target number. Once you know your desired monthly income, you can set targets for your IRA savings.
Your Social Security Income
Determine how much you expect to receive from Social Security benefits when you retire. This amount varies based on when you retire and how much you have contributed. The Social Security Administration offers a retirement estimator online that will tell you your estimated benefit at retirement. Estimate your income from Social Security benefits before you determine what you will need from your IRA.
Your IRA Income
Calculate how much you will need from your IRA each month. For example, if you will receive $1,000 per month from Social Security and you want $5,000 per month to live on, you will need an additional $4,000 per month from your IRA. This figure depends on your personal target for monthly income.
Your Target Savings
According to West Michigan Entrepreneur University, to protect your savings at retirement, you should plan to withdraw 3 to 4 percent as income. This will allow for some growth and preserve your savings. As a rough guide, for every $100 you withdraw each month, you will need $30,000 in your IRA. If you withdraw $1,000, for example, that’s 10 times 100, so you would need 10 times $30,000, or $300,000 in the IRA. If you want to withdraw $4,000 per month, that’s 40 times 100, so you would need 40 times $30,000, or $1,200,000.
Your Monthly Contribution
Once you know your target savings amount, you can determine how much you should contribute each month. Many financial sites offer online calculators that help you determine how your contributions should add up by the time you reach retirement. Your total IRA savings depend not only on how much you contribute each month but how long you plan to contribute and how well your investments perform. You can delay retirement by staying on the job or starting a business. This will allow you to contribute more to your IRA before retirement.
Kevin Johnston writes for Ameriprise Financial, the Rutgers University MBA Program and Evan Carmichael. He has written about business, marketing, finance, sales and investing for publications such as "The New York Daily News," "Business Age" and "Nation's Business." He is an instructional designer with credits for companies such as ADP, Standard and Poor's and Bank of America.