Most people have no idea whether they're saving enough for retirement until it's close. These five checks give you a clear picture in less than an hour.
1. Compare your savings to your age
One widely used benchmark from Fidelity suggests saving roughly:
| Age | Retirement savings target | |---|---| | 30 | 1x your annual salary | | 40 | 3x your salary | | 50 | 6x your salary | | 60 | 8x your salary | | 67 | 10x your salary |
These are guidelines, not rules. Your target depends on when you want to retire and the lifestyle you want.
2. Check your savings rate
A common recommendation is to save around 15% of your income for retirement, including any employer match. If you started late, you may need more.
At minimum, contribute enough to get your full employer match. Skipping it means leaving part of your compensation behind.
3. Estimate the income you'll need
Many people need roughly 70% to 80% of their pre-retirement income to keep a similar lifestyle. Some costs go down, like commuting and retirement contributions, while others, like health care and travel, often go up.
Write down your expected monthly expenses in retirement, then subtract income you expect from Social Security and any pension. The difference is what your savings need to provide.
4. Test your number with the 4% rule
The 4% rule is a rough guide for how much you can withdraw each year without running out of money. Multiply the annual income your savings need to provide by 25 to estimate your target.
For example, if you need $40,000 per year from savings, your target is about $1,000,000.
It's a starting point. Market conditions, retirement length, and taxes all affect the right withdrawal rate.
5. Look at taxes in retirement
A dollar in a traditional 401(k) isn't the same as a dollar in a Roth account. Traditional withdrawals are taxed as income, while qualified Roth withdrawals are tax-free. A mix of account types gives you more control over your tax bill each year in retirement.
What to do if you're behind
- Increase contributions by 1% each year, or every time you get a raise.
- Use catch-up contributions if you're 50 or older.
- Cut fees by checking what your funds and accounts cost.
- Review your investment mix so it matches your timeline.
- Consider working a little longer, which adds savings and shortens the years you need to fund.
- Protect what you've built with the right insurance, so an illness or death doesn't derail the plan.
Don't forget health care and longevity
Health care is one of the largest retirement expenses, and people are living longer. Planning for 25 to 30 years of retirement isn't unusual.
Get a free retirement review
Want to know exactly where you stand? Jeeyar Solutions will review your accounts, estimate your retirement income, and show you clear next steps. Request your free review.
This article is for educational purposes only and isn't individual investment or tax advice. Benchmarks are general guidelines and may not fit your situation.
