How Much Should You Be Saving for Retirement Every Month?
That’s a simple question that seems to go unanswered despite all the articles, podcasts, and news segments related to the importance of saving for retirement.
You can easily find benchmark percentages based on your income. Fifteen percent gets thrown around a lot. BUT! Does that factor in your age? Current retirement savings? Or your retirement goals? No. No, it does not.
There are also tons of calculators that say you need something like $1,000,000 by the time you retire, but that won’t tell you how to get there or explain compounding interest, or any gains.
If you want a specific dollar amount that you should be saving in your retirement accounts for a monthly basis, then you’ve come to the right place. This takes into account your personal goals and information to account for your result.
This article will show you how to create a simple spreadsheet that you can use to calculate your own retirement savings goals.
You can run this on excel, or open it in google drive if you don’t have or don’t want to pay for excel.
Once you have it open, all you need to do is enter your data into the input fields
- Current Age: If you’re single, enter your age. If you’re married or in a long term relationship which involves retirement together, then enter the age of the oldest partner.
- Current Retirement Savings: Add up all of your retirement balances, if you’re using Personal Capital like I’ve recommended this should be quite comfortable even if you’ve jumped around 401(k)s or IRA’ s etc.
- Estimate Retirement Age: When do you want to retire? You can play around with this number to see how you feel. Planning now lets you retire early, remember that.
Estimated Monthly Expenses in Retirement: How Much Should You Be Saving for Retirement Every Month
Enter the amount of money you want to have available to you to spend each month in retirement. You can also play with this number to see how it will affect your monthly savings goals. Your current monthly spending habits are a good start for this number.
- Estimate Social Security Income: You can download your Social Security Statement here to use your actual projected Social Security Benefits. Or grab a rough estimate here. Keep this in the back of your mind though; recent projects show that even if no changes are made to Social Security, there’s enough money to pay out 73% of projected benefits through 2091. You may not want to count on your full benefit payments when doing this spreadsheet, but you can rely on a bit.
- Estimate the Social Security Start Age: Many people will start to collect Social Security as early as they can (currently 62) some may begin as late as 70. Just know the date you start drawing on your benefits will dictate the monthly income you do receive.
Now that all the fields are explained you’ll be presented with two savings goals.
First off, and the main reason you’re here is the monthly savings goal. This is the estimated monthly amount of money you should be setting aside to keep you on track for retirement.
Secondly your annual savings goal, which is just your monthly goal multiplied by 12.
Looking at these numbers will tell you a bit.
- If you’re currently saving at or above the monthly/yearly goal, then you’re right on track for retirement. If you’re above this savings goal, you can start to mess around with lowering the retirement age. Although if you are drastically underneath the monthly goal, check out when you will be able to retire without making any drastic changes.
- If you don’t meet the monthly/yearly goals, you have something to work towards. Check out your budget and see what can be sacrificed, eliminated, or reduced to help meet your goal.
Please take note
This is a retirement calculator. Use it to give yourself a reference to get on track for retirement. It is by no means a guarantee.
Also, there are several built-in assumptions to the sheet. Check out the “Assumptions” tab of the spreadsheet. Try and play around with the numbers, lower the investment return, increase it, etc. and see what it will do to the numbers. Inflation and investment return are not constants, so please take note of this note.
Also, your savings and investment goals will change over time. Much like the value of your investments that are in a constant state of flux. Remember to re-evaluate these numbers at least annually. Just like you would re-balance your stock portfolio, check and see what your savings goals should be.
Hopefully, this calculator will help to motivate you to save for your retirement.
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