Start planning your retirement income

Planning for retirement isn’t just about saving money. It’s about making sure you’ll have enough income to cover your expenses and support the lifestyle you want without outliving your money. But how do you know how much income you’ll need, where it will come from and whether it will be enough? Here’s how to start planning.

When you imagine your retirement, what do you picture?  For example, you might hope to spend more time with loved ones, enjoy a hobby, volunteer or travel.

The lifestyle you want in retirement affects the amount of money you’ll need. So do other factors like the age you plan to retire, how long you might live and your potential health care and long-term care costs. The total amount you save should be enough to generate an income that achieves your goals. To set a savings target:   

• Use the My Retirement Goals tool inside your account. This tool offers a clean, user-friendly experience that brings all your retirement planning details together in one place. As you enter your goals and financial information, the tool updates instantly to give you a real-time view of your progress.
• Calculate 80% of your current income. While this doesn’t account for your specific goals, it can provide a rough estimate. Experts suggest you may need about 80% of your pre-retirement income to maintain your lifestyle when you retire. For example, someone who earns $40,000 a year today might need around $32,000 annually.

Next, figure out where your retirement income will come from, how much it might be and whether it will cover your expenses. For an easy way to get started, use our Retirement income planner (PDF) worksheet.

Consider the mix of income sources you might have and how much they might provide, including:

• A pension: If you have one, review your benefits by checking with your HR or benefits office. Be sure you understand any factors that can affect how much you receive.  
• Your retirement plan: Check your account balance online or review statements.  (Pro tip: With the My Retirement Goals tool, you can review your projected retirement income and goal progress instantly as you make changes.)
• Social Security: To get an estimate of future benefits, including how much you might receive if you claim at different ages, create an account at ssa.gov/myaccount.
• Personal savings and investments: Review accounts, including statements for IRAs, brokerage accounts, bank accounts and other savings.

While costs in retirement can change, ballpark them now based on what you’re spending today as well as future plans (such as paying off a mortgage). Check bank and credit card statements, bills, receipts and other expense records. Include less-than-monthly costs such as twice-a-year insurance premiums.

If your expected income is less than you may need, take steps now to help bridge a shortfall. You can:

• Increase your savings: Even a small increase in your retirement plan contributions every year can make a big difference in how much you have.
• Delay retirement: Working a few additional years can boost your savings and reduce the number of years you’ll need to use your income.
• Delay Social Security: Waiting to claim benefits can increase your monthly income for life. (Refer to our Social Security 101 article to learn more.)
• Adjust your lifestyle: Downsizing your home, relocating to a lower-cost area or cutting back on spending can help stretch your retirement dollars.
• Review your investment options. Consider which options best fit your retirement goals and your comfort with risk.
• Work in retirement. Having a part-time job as a retiree can boost your income. Our article Benefits of continuing to work in retirement details other potential advantages.