It seems like a simple, and sensible, question.  Also known as “How much should I have saved?” and “Am I ahead or behind?” – it is a question that planners everywhere strive to answer in some way.

The real answer, of course, is that there is no single answer.  In retirement planning, we have to get comfortable with a spectrum of grey, rather than demand an answer in black and white.

Our human brains don’t like this because they are wired to make comparisons.  Centuries ago, this helped us to stay alive.  Now it is less helpful, but we can’t seem to turn it off.  So we may as well put it to good use.  If these calculations spur you to make a positive change (even a small one), then this will have been a helpful exercise.

Here are three methods to evaluate your retirement savings.

Method #1: Use your current age and salary as a guide.   

This simple method has been recently popularized by Fidelity Investments,, and CNN.

The timeline recommends that you have the equivalent of 1 year of your salary saved by age 30;
twice your annual salary saved by age 35;
three times by age 40;
four times by age 45;
five times by age 50;
six times by age 55;
seven times by age 60;
and eight times by age 65.
The end-game here is to have ten times your final salary saved by the age you retire.

For example, this means if you are making $50,000/year when you are age 30, you should have about $75,000 saved by the time you are age 35, and $350,000 by the time you are age 60.

This method has the benefit of being quick and easy, but it doesn’t take into account the type of lifestyle you may want in retirement, and how much that’s going to cost.  If you would like to retire to a condo in Manhattan, you’re going to require a very different nest egg than retiring to an apartment in Iowa.  So while this method can provide a general “rule of thumb,” it could lead you to an erroneous perception of “how you are doing,” depending on your actual end-goal.

Method #2: Start with the end in mind/work backward.

With this method, you begin by thinking about how much income you’ll need in retirement.  In other words, how much does your “retirement paycheck” need to be?  The farther away your retirement is, the harder this is to quantify, so I usually start with this example:
Let’s say you have a total nest egg of $1 million saved in retirement savings accounts by age 70.  If you take a 5% withdrawal rate, then your nest egg could generate a pre-tax income of $50,000 annually.  If you are in a 20% tax bracket, that will give you approximately $40,000 annually on hand to spend.  Would that be enough for the lifestyle you want to have?

If the answer is yes, then you’ve found your approximate retirement goal ($1 million by age 70).  If the answer is no, then you may need to continue playing with the numbers.  (For example, do you need an annual pretax income of $100,000?  That could require a $2 million nest egg.)

Of course, this method doesn’t take inflation into account (i.e., the price of milk and bread when you retire is not going to be the same as the price of those items today).  The younger you are, the more significant inflation can be, so leaving that out of your calculation could be dangerous.

Method #3: Embrace an actual retirement calculator.

You can find a variety of retirement calculators online. has a ton of different options:

You can pick one for your situation and the question on your mind, input your numbers, and view the results.  While still estimates, these calculations are generally going to be more sophisticated than the previous two “rough estimate” methods.

Here’s a calculator that factors in not only an estimate for inflation but also for Social Security:

You need to know a few stats beforehand, like how much you have currently saved, how much is going into your retirement accounts each year, the approximate age you want to retire, and an estimated rate of return on your investments.

I think this method has the potential to be the most helpful because it is the most flexible and dynamic of the three.  You can change each variable to see the potential impact on your future savings.  For example, you can play with “what-if’s” such as: “what if I retired a year earlier?” or “what if I save 1% more each year?” and see how the answers affect your results.

Of course, none of these methods help you to figure out the HOW, which is the most important part.  As we stated in the beginning, the best way to use these calculations is as a guide, rather than a black and white answer.

If doing your “retirement math” opens the doorway to further discussion and spurs you forward to make positive change, then well done!  Your future self may very well thank you.



Shadowridge Asset Management, LLC does not offer tax planning or legal services, but may provide references to accounting, tax services or legal providers. They may also work with your attorney or independent tax or legal advisor.