Am I on Track for Retirement?
Written by
Heather Taylor
Edited by
Molly Sullivan
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Twenty-eight percent of Americans are not on track to retire.
GOBankingRates’ financial literacy 2023 survey polled 1,056 Americans to learn more about their understanding of finance and money skills. When it comes to saving for retirement, 29% of overall respondents said they started saving between ages 18 and 25. However, 28% of respondents said they had not yet started saving or planning for retirement. At 38%, the largest age range of those who had not started saving for retirement were Americans between the ages of 25 and 34.
No matter which generation you belong to, it is never too early to begin retirement planning. The following strategies will help you determine if you are on track for retirement.
Conduct a Financial Plan
One of the first steps in determining whether you’re on track for retirement is conducting a financial plan.
Aviva Pinto — CDFA, CDS and managing director at Wealthspire — said your financial plan will look at the following factors:
- Your age (to determine longevity)
- When you plan to retire
- Your current income
- How much your income is expected to change over time
- Your monthly expenses
Pinto said this plan makes assumptions for inflation, taxes, healthcare and long-term care, and whether you may move to a lower tax state in retirement. It calculates the retirement income you receive, including Social Security, rental income, pension and investments, and adds in additional factors like paying for weddings or contributing toward a child’s education.
From here, you should be able to see if you are on track to retire or if you will need to start making changes to get back on track. If you need to get back on track, Pinto said the financial plan will point out if you need to spend less, save more or add more to your 401(k) or 403(b) plan. Pinto recommends those with financial plans regularly revise them, especially as life events occur, to ensure they’re on track with meeting their retirement goals.
Will Your Expenses Change in Retirement?
It’s important to ask yourself, and honestly answer, if you plan on spending more money in retirement. Some retirees may delay a planned retirement if they have made a conscious decision to spend more money when they are retired, said Jim Eutsler — CFP, ChFC, CMA and wealth advisor at HCM Wealth Advisors.
“If your anticipated fixed cash flow stream in retirement, whether from a pension, Social Security, dividends from a diversified portfolio or annuity payments can account for the bulk of your spending, even a modest nest egg can often pick up the balance and you increase the odds of a successful and on time retirement,” Eutsler said.
How much money should you have saved by retirement? Rita Assaf, vice president of retirement products at Fidelity Investments, said the general recommendation is 10 times your pre-retirement income by age 67. By the time you are age 30, you should have saved at least one time your income. By age 40, you’ll want three times the savings, six times by age 50 and eight times by age 60.
Do You Have a Retirement Game Plan?
What would a typical day, week and month look like for you in retirement?
Jordan Gilberti, CFP at Facet, recommends walking yourself through a normal Monday, week and month where you are presently. Consider what you are doing with your time right now and what you would like to do when you retire.
Other aspects of your retirement game plan to think about include the following:
- What monthly income are you comfortable living on in retirement? If you don’t know the number, or what you spend, Gilberti said to start by reverse engineering your income. Once you better understand your monthly spending habits, you’ll be able to figure out if your savings, Social Security and pensions can replicate the lifestyle you’re accustomed to.
- Are you prepared to stop working? If not, you may consider part-time or consulting work or taking part at a non-profit during retirement.
- What’s your family’s health history? Gilberti uses the example of someone whose parents lived into their 90s. If you come from a family with good health and long lifespans, you may consider planning for a longer retirement with potential long-term care costs.
“Retirement is a blank canvas – a time of life where you can create a lifestyle based on your values and goals, without the schedule constraints of work,” Gilberti said. “It can be the most rewarding chapter of your life!”
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