Do you know how much you can expect from Social Security in retirement—or from any pension plan you have?
Do you know how much you need to save to make up the shortfall in your desired retirement income?
Gather information about any traditional pension and other retirement plans you have. Request a benefit summary plan, including when and how you’ll receive your payments. For an estimate of your future Social Security benefit, visit http://ssa.gov/myaccount/ to set up your account.
Then estimate your retirement expenses. In general, you’ll need about 70% to 80% of preretirement expenses. But these traditional formulas may leave you short–due to longer life expectancies, active retirement lifestyles, higher medical expenses, long-term-care costs, and higher property taxes.
If anything, overestimate for unexpected spending and factor in annual cost-of-living increases between now and the time you retire, as well as throughout retirement.
A financial adviser, retirement planning software, or internet calculator can help you calculate how much you need to save to make up the shortfall in your desired retirement income. Remember that even the best advisers and software can provide only an estimate of your needs. Your results will change based on actual investment returns, inflation rates, tax law changes, changes in Social Security, and how long you live, among other things.