Calculate Your Retirement Savings

When it comes to saving for retirement, you need to try to figure out how many years you’re saving for, how much money you need, and how and where to save it. Fortunately, help is available.

• Do the math. Ideally, your retirement savings calculation should be accurate enough that you don’t save a lot more than you need or have to drastically lower your standard of living.
• Five key variables in retirement savings calculations are: age at retirement, amount of annual income needed (as a percentage of preretirement income), growth rate on savings, estimated life expectancy, and amount of money currently saved.
• The earlier the planned retirement age, the more someone needs to save prior to retirement because they have fewer years to save and a longer time to sustain themselves on invested assets.
• The higher the growth rate on savings, the less someone needs to save annually because compound interest will help grow their money. The trade-off is that higher returns require a higher asset allocation in common stock and/or stock mutual funds with greater investment risk.
• The length of retirement (life expectancy) cannot be known in advance, but there are ways to make an educated guess. One is to start with average life expectancy figures by gender and age and adjust them for personal health status and family longevity.
• A major factor for many people in choosing an age to retire is the availability and cost of health insurance.
• Get help. Hundreds, if not thousands, of retirement planning worksheets and online calculators are available. Some keep calculations simple by making assumptions about key variables such as life expectancy and the earnings rate on investments. Others allow users to make their own assumptions. For a start, check out the Retirement section in our Resource Library.  
• To interpret the output from any type of retirement savings analysis correctly, be sure to understand all the underlying assumptions.
• Before using any retirement planning tool, review the benefit estimate the Social Security Administration provides annually, plus information about expected employer benefits, if any.
• Take action. Enroll in a tax-deferred retirement savings plan: 401(k)s at forprofit corporations, 403(b)s at schools and nonprofit organizations, and 457 plans for employees of state or local government.
• When investing in retirement plans, start small, if necessary. Then, gradually increase your savings, especially when income increases or a household expense (child care or a car loan) ends.

When it comes to saving for retirement, you need to try to figure out how many years you’re saving for, how much money you need, and how and where to save it. Fortunately, help is available.

• Do the math. Ideally, your retirement savings calculation should be accurate enough that you don’t save a lot more than you need or have to drastically lower your standard of living.
• Five key variables in retirement savings calculations are: age at retirement, amount of annual income needed (as a percentage of preretirement income), growth rate on savings, estimated life expectancy, and amount of money currently saved.
• The earlier the planned retirement age, the more someone needs to save prior to retirement because they have fewer years to save and a longer time to sustain themselves on invested assets.
• The higher the growth rate on savings, the less someone needs to save annually because compound interest will help grow their money. The trade-off is that higher returns require a higher asset allocation in common stock and/or stock mutual funds with greater investment risk.
• The length of retirement (life expectancy) cannot be known in advance, but there are ways to make an educated guess. One is to start with average life expectancy figures by gender and age and adjust them for personal health status and family longevity.
• A major factor for many people in choosing an age to retire is the availability and cost of health insurance.
• Get help. Hundreds, if not thousands, of retirement planning worksheets and online calculators are available. Some keep calculations simple by making assumptions about key variables such as life expectancy and the earnings rate on investments. Others allow users to make their own assumptions. For a start, check out the Retirement section in our Resource Library.  
• To interpret the output from any type of retirement savings analysis correctly, be sure to understand all the underlying assumptions.
• Before using any retirement planning tool, review the benefit estimate the Social Security Administration provides annually, plus information about expected employer benefits, if any.
• Take action. Enroll in a tax-deferred retirement savings plan: 401(k)s at forprofit corporations, 403(b)s at schools and nonprofit organizations, and 457 plans for employees of state or local government.
• When investing in retirement plans, start small, if necessary. Then, gradually increase your savings, especially when income increases or a household expense (child care or a car loan) ends.