Decide When You’ll Retire

To determine your total retirement needs, you can’t just estimate how much annual income you need. You also have to estimate how long you’ll be retired. The longer you are in retirement, the more years of income you’ll need to fund it. The length of your retirement will depend partly on when you plan to retire. This important decision typically revolves around your personal goals and financial situation. For example, you may see yourself retiring at 50 to get the most out of your retirement. Maybe a booming stock market or a generous early retirement package will make that possible. Although it’s great to have the flexibility to choose when you’ll retire, it’s important to remember that retiring at 50 will end up costing you a lot more than retiring at 65.

Estimate Your Life Expectancy

The age at which you retire isn’t the only factor that determines how long you’ll be retired. The other important factor is your lifespan. We all hope to live to an old age, but a longer life means that you’ll have even more years of retirement to fund. You may even run the risk of outliving your savings and other income sources. To guard against that risk, you’ll need to estimate your life expectancy. You can use government statistics, life insurance tables, or a life expectancy calculator to get a reasonable estimate of how long you’ll live. Experts base these estimates on your age, gender, race, health, lifestyle, occupation, and family history. But remember, these are just estimates. There’s no way to predict how long you’ll actually live, but with life expectancies on the rise, it’s probably best to assume you’ll live longer than you expect.

Identify Your Sources of Retirement Income

Once you have an idea of your retirement income needs, your next step is to assess how prepared you are to meet those needs. In other words, what sources of retirement income will be available to you? Your employer may offer a traditional pension that will pay you monthly benefits. In addition, you can likely count on Social Security to provide a portion of your retirement income. To get an estimate of your Social Security benefits, visit the Social Security Administration website (www.ssa.gov). Additional sources of retirement income may include a 401(k) or other retirement plan, IRAs, annuities, and other investments. The amount of income you receive from those sources will depend on the amount you invest, the rate of investment return, and other factors. Finally, if you plan to work during retirement, your job earnings will be another source of income.

Make Up Any Income Shortfall

If you’re lucky, your expected income sources will be more than enough to fund even a lengthy retirement. But what if it looks like you’ll come up short? Don’t panic—there may be steps that you can take to bridge the gap. We can help you figure out the best ways to do that, but here are a few suggestions:

• Try to cut current expenses so you’ll have more money to save for retirement.
• Shift your assets to investments that have the potential to substantially outpace inflation (but keep in mind that investments that offer higher potential returns may involve greater risk of loss).
• Lower your expectations for retirement so you won’t need as much money (no beach house on the Riviera, for example).
• Work part-time during retirement for extra income.
• Consider delaying your retirement for a few years (or longer).


Calculated from Consumer Price Index (CPI-U) data published by the Bureau of Labor Statistics, January 2021Source: Broadridge Investor Communication Solutions, Inc.