Three Questions to See if Your Retirement Plan is on Track

Three Questions to See if your Retirement Plan is On Track

  1. Where Am I?  That is: What is your current, investible net worth and how much are you able to save toward retirement every month?
  1. Where do I need to be?  That is:  How much income do I need to replace in order to maintain my standard of living?
  1. Will what I am currently doing get me to where I need to be by retirement?

Let’s see how this might work…

Let’s say you are 45 years old with $300,000 in a 401(K) plus you’re able to save $800 per month with an 8% growth rate

Using the “Calculators” tab and selecting “Savings” on our Website,, we can calculate where you will be at age 65.

$300,000 + $800 per month for 20 years at 8% = $1,837,602

Now you know where you are; and where you will be in 20 years.

On to question #2 – Where do I need to be?

Keeping it simple, let’s say you have $100,000 per year in income and will get $30,000 in Social Security; leaving $70,000 shortfall in current dollars.

Assuming 3% – 4% inflation/pay raises over the next 20 years, you will double your cost of living/income; meaning you will have to replace approximately $140,000 in income.

You may say, “But my cost of living will go down!”  That may be true, but sometimes in our retirement, now that we have time to travel and time for hobbies, our cost of living actually might go up; especially when we start factoring in the cost of long-term care

But to keep it simple, let’s say you pay off your house and will no longer be making contributions to your 401(K), saving $30,000 per year.

$140,000 - $30,000 = $110,000.  Using the 8/4 rule – 8% growth/4% distribution (see the article: “What Does It Cost to Retire” on my Website) -- $110,000 ÷ 4% = $2,750,000 needed to replace your current income.

Now for question # 3 – Will what I am currently doing get me to where I need to be by retirement?

Projected retirement nest egg = $1,837,602

Projected Nest egg needed = $2,750,000

That leaves you with a short-fall of $912,398




Interestingly, you’re not as far off as you might think …

Increasing your savings by $600 per month to $16,800 per year and working 3 extra years closes

the gap.

$300,000 + $1,400 per month for 23 years at 8% = $2,784,446

So now you know that if you increase your saving/investing goals every time you get a pay raise, and if you work a few extra years, you’re on tract to retire at 68.

Call me at 866-469-6501and I will help you build your own customized retirement plan.

Please remember all calculations were based on assumptions and do not guarantee future results. 

Securities and Advisory services offered through LPL Financial, a registered Investment advisor. Member FINRA/SIPC

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