How to Determine What You Need to Save for Retirement

In the article How Much Should I Save for Retirement, the final consensus, recommended by most financial experts, was 10%-15% of your income. Saving 10%-15% of your income could get you close enough to your goal retirement amount. But, what if your situation is a little different? How do you know what you need to save for retirement, based on your situation?

Obviously, there is no one true answer that applies to all. The 10-15% amount is a great approach, but certain factors can change that number for you. I’m sharing how to determine what you need to save for retirement, or at least how to get a ballpark number.

The younger you are, the harder it is to answer this question. On the other hand, the younger you are, the less you need to save initially. Thanks to compounding growth, the sooner you start saving for retirement, the more you will have when you do retire. Read 7 Reasons to Start Saving for Retirement Early to learn a little more.

Start with the general rule

Outside of the age-old question of what I should save for retirement now, and the answer being 10-15% of your income, there is a general rule of what you will need at retirement.

According to Investopedia, “most experts say your retirement income should be about 80% of your final pre-retirement salary. That means if you are making $100,000 annually at retirement, you will need income of at least $80,000 per year to have a comfortable lifestyle after leaving the workforce.”

Keep in mind that this number can change depending on other factors at retirement. You may have a part-time job, passive income, or Social Security to help. I think it’s better to be safe than sorry, so focusing on 80% pre-retirement salary as your final number is way to go.

If you’re young, there’s not really a good way to know what that final pre-retirement salary will look like, so instead, think about your future income needs.

Think about your future income needs

Let’s answer the question of what I need to save for retirement from the opposite side. How about we think about what we will need at retirement, and then work from there! This means you need to think about your future lifestyle and what you will need to maintain it.

Start by working with your current monthly expenses. How do you expect your situation to change? Do you plan to have a mortgage? Do you plan to have kids? List out your current monthly expenses in a spreadsheet, then create a “future expenses” column. Factor in any mortgage payment suitable for your area, and any future monthly expenses. This won’t be easy, so it’s better to overestimate than underestimate.

Add up all of those monthly expenses and multiply by 12. This will give you an idea of what your annual salary will need to be at retirement. That will likely be a high number too. The goal is to have your mortgage paid off before retirement, but that does not always happen.

Leverage a retirement calculator

Once you have an idea of what you will need annually for retirement, you can leverage a retirement calculator to see if you are on track. The retirement calculator can also help you determine what you need to start saving now to reach your annual retirement goal amount.

Here are a few good retirement calculators to try:

NerdWallet’s Retirement Calculator

Merrill Edge’s Retirement Calculator

Bankrate’s Retirement Calculator

Once you have an idea of what you need to save to reach your annual retirement goal, make sure your investments are in line. If you are primarily invested in bonds and low-risk assets, your growth will not be as great as if you were invested in stocks. Check out how I picked my 401k investment options and how you can research your investment options.

Don’t set it and forget it

When it comes to saving, I typically say “set it and forget it”, meaning designate your savings amount and don’t touch it! Let time do its thing so your savings can grow. The same doesn’t exactly apply to your retirement savings. You definitely don’t want to touch it, but you also don’t want to forget it.

As your situation and needs change, make sure you check in on your retirement savings. Run a retirement calculator based on your new needs. Adjust your savings amount accordingly. We never know what the future holds, so always keep your retirement in the back of your mind when changes do happen.

You will want to check in on your retirement plan and make sure all is functioning smoothly. As you get closer to retirement age, you will want to ensure you aren’t as fully invested in stocks as you were when you were younger. They are much riskier, and the closer you get to retirement, the less risk you want to take.

Related: The Millennial Woman’s Path to Retirement


Retirement may seem like ages away but planning for it now is a must! Are you currently saving for retirement? How did you determine what amount to save? Have you leveraged a retirement calculator? Leave a comment below to share!

The CGS Team



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