How To Calculate Your Retirement Needs

If you're under the age of forty and have not invested in a retirement plan, don't worry, it's never too late to start. The first action you should take is to determine your retirement needs. For most of us, it's best to count on needing 70 percent to 90 percent of our pre-retirement income to live comfortably.

It's easy to calculate your retirement needs with pencil and paper. Here's a simple process you can use:

Line 1: Annual amount needed at retirement age in current dollars
Line 2: Number of years until retirement
Line 3: Annual expected benefits from employer plans...
Pension Plan =
401(k) =
Other =
Subtotal =
Line 4: Annual expected benefits from personal assets...
Social Security
IRA =
Other =
Subtotal =
Line 5: Grand total -- Line 3 added to Line 4 =
Line 6: Difference -- Line 1 minus Line 5 =

If this is positive, it's how much extra you need each year to achieve your annual retirement needs on Line 1. If after you've collected the data and crunched the numbers your retirement income falls short of what you think you'll need, you'll have to address the question of how much you have to accumulate to produce enough interest to make up for the shortfall.

Heritage Credit Union is a great source of information on how to save for retirement. We will sit down with you and calculate all the different options you have to save for tomorrow. Take advantage of these services. It's free with your membership.