It really depends on the lifestyle you hope to lead. Generally, most financial advisors recommend targeting about 80% of your preretirement income if you want to maintain your current standard of living.
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How to calculate retirement income
Will you have enough money coming in to maintain your lifestyle and meet your needs in retirement? If you’re not sure, this article will walk you through many key factors to consider and offer some practical tips on how to calculate your retirement income.
Why it’s important to calculate retirement income
When preparing for retirement, it’s important to know two key pieces of information: how much money will be coming in and how much money will be going out. Once you have this information, you can begin to put together a retirement budget and address any potential shortfalls.
What are your sources of retirement income?
In the past, it used to be easy to determine the amount of income you could expect to receive in retirement. That’s because many people had two steady, dependable sources of income: Social Security and a pension. These days, things are more complicated—as pensions are not as common and most of us will have to find other ways to generate the additional income we’ll need to maintain our quality of life in retirement.
Social Security is the foundation
Social Security benefits are the primary source of retirement income for millions of Americans. Since benefits are paid monthly, guaranteed to last for life, and use cost-of-living adjustments (COLA) to offset inflation, this government-backed program is a critical part of every retirement plan.
Pensions add stability
While pensions are hard to find in America these days, they still exist—mostly in the public sector. Like Social Security, pension benefits can be invaluable in retirement as they provide another steady, dependable stream of income that you can count on for the rest of your life.
Retirement savings play a key role
With traditional pensions in decline, many Americans are forced to rely heavily on their 401(k), IRA, or other personal assets. When withdrawing funds, however, you’ll need to proceed cautiously or risk running out of money if your retirement lasts longer than expected.
Other potential options
If you’re fortunate, you may have other sources of income to tap into during retirement. Dividends, rental income, and royalties are just some potential options. Another option is to convert some of your savings to an income annuity that delivers guaranteed monthly income payments1—much like a pension. In fact, some income annuities are guaranteed for life, so you never have to worry about outliving your money.
How long will my savings last?
That’s a common question among current and soon-to-be retirees. In fact, a 2022 study found that 63% of Americans are worried about not having enough money for retirement.2 If you happen to be one of them, you may find the following retirement savings calculator helpful. But there are a few things you will need to know before you start.
I'm retired, how long will my savings last?
Savings in Retirement Calculator
We're here to help you better understand your total income and expenses in retirement.
SAVINGS IN RETIREMENT
- Income Needs
- Social Security
- Pension
- Other Income
- Savings
Step of 5
The results are hypothetical based on your input. Your actual results will vary. Any rates of return used are for illustrative purposes only and does not represent performance of any actual financial vehicle/strategies.
How to calculate your retirement savings
If you want to know how long your savings will last, there are several important factors you’ll need to consider:
Your current age
Ideally, we would all start saving for retirement at as young an age as possible. The way that interest compounds on investments makes $5 saved at age 20 far more valuable than $5 saved at age 40. When calculating your retirement income, your age today will indicate how much time your current and future investments will have to grow.
Your projected retirement age and length
While most workers would probably like to retire early, it’s important to realize that delaying retirement—even for a year—can have a profound effect on your financial future. That’s because every year you remain in the workforce offers the following advantages:
More time to save: You can still contribute to your retirement accounts
Less time to deplete savings: You can continue to live on your workplace salary and benefits
Increased Social Security: Benefits increase 8% a year from age 62 to 70.3
Your current and future savings
As previously mentioned, most of us will have to rely heavily on our savings in retirement. That’s why it’s important to know how much you have in your portfolio to date, and how much more you plan to save each year until retirement.
Your rate of return on investments
Once you have estimated the size of your retirement portfolio, the next step is projecting your rate of return. While most people estimate somewhere between 5% and 10% growth, it really depends on your portfolio mix. If most of your money is in CDs, municipal bonds, and other conservative investments, you may want to project on the lower side of the scale. If you plan to invest aggressively in the market, history suggests that you could lean more toward the higher side.
Your income needs
While everyone’s lifestyle and needs are different, many financial experts believe that retirees will need somewhere between 70% and 80% of their current income to live comfortably. To find out where you stand, add up all your monthly expenses and see if you can trim any of them down once you stop working.
Housing: Rent/mortgage, maintenance, HOA fees
Utilities: Gas, water, electric, phone
Healthcare: Insurance, medications, out-of-pocket expenses
Transportation: Fuel, car payments, insurance, maintenance
Food: Groceries and restaurants
Travel and Entertainment: Movies, sports, hobbies, club dues
Once you have the figures you need, simply plug them into the calculator to see how long your retirement savings will last. Of course, it’s important to remember that the results you receive are rough estimates and that there are a host of other factors that may have to be considered. If you’d like, one of our New York Life financial professionals will be happy to give you a more detailed analysis.
Need help saving for retirement?
Now that you have a better idea of where you stand, you probably have even more questions. We know that planning for retirement can be a challenge, and that you probably have a host of other financial responsibilities to deal with as well. The good news is that you don’t have to go it alone. If you feel like your plans are coming up short—or would just like to build in a little more cushion just in case—you can count on our financial professionals to help.
How to calculate retirement income FAQs
According to the Social Security Administration, the average monthly benefit for retirees was $1,872 in 20244—however, the amount you receive will depend on your age at retirement and how much you earned during your career.
For many people, Social Security benefits simply aren’t enough to live on. Fortunately, there are many ways to make up the difference. If you don’t have a pension, you could use dividends, income annuities, or even pick up a part-time job. If you’re concerned about meeting your retirement goals, a financial professional can help.
According to a 2024 survey, most Americans believe they will need just over $1 million to retire comfortably.5 Of course, this number could vary based on your retirement goals, desired lifestyle, and whether you have a pension or other dependable sources of income to help pave the way.
Discuss your retirement goals with a financial professional.
We provide a broad range of products and solutions to help guide your strategy.
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1Guarantees are based upon the claims-paying ability of the issuing insurance company.
2Lydia Saad, “Americans’ Financial Worries Tick Up in Past Year,” Gallup, May 9, 2022.
3“Delayed Retirement Credits,” Social Security Administration.
4“Here’s the Average Social Security Benefit at Every Age,” Yahoo!Finance, November 12, 2024.
https://finance.yahoo.com/news/average-social-security-benefit-every-120016509.html
5“The Magic Number: Americans Say They Need $1.06 Million to Retire,” The Currency, October 2, 2024.
https://www.empower.com/the-currency/money/retirement-savings-magic-number-research-news