As you save for retirement, it’s beneficial to know how much to save and whether you’re on the right track. Of course, everyone’s situation is different, but some useful retirement benchmarks can give you a sense of how you’re doing to reach your goals.
After comparing your numbers to the benchmarks, you can make necessary adjustments and regularly check your progress.
To set your retirement savings benchmark, you need to consider two factors — how much you’ve already saved for retirement and your current age. Then, compare your savings against your current gross income to begin setting savings goals based on your income.
What is a good retirement savings goal? Many financial institutions and experts have a few guidelines to help answer that question.
Retirement savings guidelines
Another benchmark concept: aim to replace nearly 80% of your current annual income in retirement so you can maintain your lifestyle once you retire.
Of course, the big unknown is how long will you live and how long should your savings last? For a guesstimate, try using the Social Security Administration’s Life Expectancy Calculator. Here’s an example using the 85% rule and life expectancy estimates:
Say you were born in 1970 (you’re now 51) and want to retire at 67, so you will retire in 2037. And let’s assume your annual income is $40,000. If you expect to live for 20 more years after retiring, you’ll need ($32,000 x 20) = $640,000 in retirement savings.