How Do I Determine If I Have Saved Enough to Retire?

A retirement planner with tips on how much money to save for your You'll also find out if your likely retirement income is less than you need to.
Table of contents

A few quick bits on expenses and spending. To a certain extent, retirement planning is the art of accurately matching future income with expenses. People seem to ignore certain expenses. For example, family vacations and a grandchild's wedding gift count the same as dental surgery and car repairs in retirement planning, but people neither include these enjoyable expenses when they are projecting their costs nor do they recognize how hard it is to cut them.

Try telling one child that you can't help with his nuptuals after paying for your other children's weddings! You want to make sure your retirement years are not merely a struggle for existence. Let's look at the retirement-money issue another way: Ten percent is the historical recommended savings rate.

However, there is an extreme mismatch between this optimal savings rate and the actual savings rate among Americans today. According to the St. Louis Federal Reserve Bank, and other reports, the U. How to Save More for Your Retirement. Adding in anticipated Social Security, her retirement will be funded. Beth might live in a low-cost-of-living area where housing, taxes, and living expenses are below the U. All of these optimistic possibilities would net a greater retirement fund and lower living expenses while in retirement.

What if the initial assumptions are too optimistic? A more pessimistic scenario includes the possibility that Social Security payments might be lower than now. Or Beth may not continue on the same positive financial trajectory. If you've reached mid-career without saving as much as these numbers say that should have put aside, it's important to plan for extra savings or income streams from now on to make up for this shortfall.

Alternatively, you could plan to retire in a location with a lower cost of living, so that you will need less.

You can also plan to work longer, which will augment your Social Security benefits, as well as your earnings, of course. If you're looking for a single number to be your retirement nest egg goal, there are guidelines to help you set one. So, a reasonable target is one that will provide you with an annual income similar to the income you have now. Then you need to consider a "safe" withdrawal rate.

This is the percentage of your retirement nest egg you will withdraw each year during your retirement. This provides a quick and dirty formula for determining the total amount you need to save by retirement: When calculating your target nest egg, and how much you have to save each month to reach that target, there are many factors that come into play:.

Of all of these, perhaps the third-to-last is the most important — or at least, the most controllable. It is far better to understand your situation when you can be proactive and make adjustments, rather than waiting for a crisis to erupt and being forced into action. Once you have an idea of how to determine how much you need, it's time to start using the tools available to you. Today, those defined-benefit plans have become virtually extinct, shifting the burden of retirement savings away from corporations and onto the employees.

No one knows the future or what savings rate is enough. Nor do we know our eventual investment returns. But savers can control how much they save — and understand how returns compound. Because of the magic of interest generating interest, the earlier you start, the less you'll have to save on a monthly basis. Clearly, planning for retirement is not something that you do shortly before you stop working. Rather, it's a lifelong process. Throughout your working years, your planning will undergo a series of stages in which you will evaluate your progress and targets and make decisions to ensure you reach them.

A successful retirement depends largely not only on your own ability to save and invest wisely, but also on your ability to plan. Remember, stuff happens in life. Do you really want to start this plus year adventure with the bare minimum? Just getting by isn't a good way to start decades of unemployment and diminishing employability.

If something unexpected happens, what are your options? Re-enter the workforce, change your lifestyle or get more aggressive with your investments?

Pension calculator

This is the equivalent of doubling down in blackjack: How much income you'll need in retirement is hard to know, and tricky to plan. But one thing's for sure: It's much better when you are over-prepared than when you wing it. By Investopedia Updated June 7, — 6: Current performance may be lower or higher than the performance quoted.

For performance information current to the most recent month end, please contact us. Returns include fees and applicable loads. Since Inception returns are provided for funds with less than 10 years of history and are as of the fund's inception date. Before investing consider carefully the investment objectives, risks, and charges and expenses of the fund, including management fees, other expenses and special risks.

This and other information may be found in each fund's prospectus or summary prospectus, if available. Always read the prospectus or summary prospectus carefully before you invest or send money.


  • Bring on the Crash.
  • Are my current retirement savings sufficient?.
  • Access Denied.
  • The Other Half of Life.
  • John Ford: A Bio-Bibliography (Bio-Bibliographies in the Performing Arts).
  • 0800 055 6112.

Prospectuses can be obtained by contacting us. Expense Ratio — Gross Expense Ratio is the total annual operating expense before waivers or reimbursements from the fund's most recent prospectus. You should also review the fund's detailed annual fund operating expenses which are provided in the fund's prospectus. Neither Merrill Lynch nor any of its affiliates or financial advisors provide legal, tax or accounting advice. Banking products are provided by Bank of America, N.

Merrill Lynch Life Agency Inc.

So, Can I Retire With $1 Million?

Select link to get a quote. Type a symbol or company name and press Enter. Help When You Want It. Help When You Need It. General Investing Online Brokerage Account. How much do you really need to save for retirement?


  1. Henry IV, Part II.
  2. The 4% Rule.
  3. Stock Picks.

    4. Use these insights from Merrill Lynch strategists to help determine if your retirement plan is on the right track. To quickly see if your investment strategy is on track, try comparing what you've invested so far with the "best savers and investors" for your age and salary range. However, the amount you need to save for retirement is unique to your situation. What may be right for you will depend on your retirement expenses and the income you expect to help cover them.

    Retirement experts have offered plenty rules of thumb about how much you need to save: Some people also may be surprised by how their seemingly large nest egg translates into annual income, as the following chart shows. Just how big your nest egg should be and how long it might last will depend not only on what you save and invest, but also on how you spend it once you do retire. That's why taking a look at your personal version of retirement and what it might cost can give you a more realistic picture of what you'll need.

    Here are some of the factors to consider as you determine what your unique savings goal should be. What they want to do in their retirement years may be very different as well. Rather than rely on a general figure, Hunter and his colleagues suggest trying to create a ballpark annual estimate based on what you live on now and what might change when you retire. The chart below from the Employee Benefit Research Institute EBRI Footnote 1 can give you a rough idea of how your expenses for housing, Footnote 2 food, health, transportation, clothing and entertainment may change during retirement to help you decide how much income you might need.

    Will Your Retirement Income Be Enough? | Investopedia

    If you plan to travel or entertain more — or pursue an expensive hobby — you'll want to think about adding in something for those more flexible, discretionary expenses too. Remember, although some costs — such as health care — may increase in retirement, there may be savings elsewhere.

    Their cost of living for items such as these goes down," says Storey.