Rule of Thumb

A rule of thumb is that people need 70% of their pre-retirement income when they retire. But, this amount will depend on the lifestyle that you want to have in retirement.

 

Paper and Pencil Calculator

Think about what you want do when you retire. Record your expenses for a month. Multiply that number by 12 to estimate the total of your expenses for a year.  How do you think your expenses will change when you are retired? List your income sources in retirement and the income that you expect to have. Compare the two numbers. Do they match? Will you need to reduce your expectations for retirement or figure out how to increase income in retirement?

 

Ballpark Estimate

To help people determine how much income will be needed in retirement, the American Savings Education Council (ASEC) has a worksheet called the Ballpark Estimate. You can print the Ballpark Estimate and calculate in pencil or you can run the calculator online.  You need to know your income and the age you want to retire. The Ballpark Estimate will tell you how much you need to save each month. Remember that it is a Ballpark (guess) Estimate.

 

If you are a two-earner couple, each person should do the calculator separately. Then add the amount that each person should save and divide by 12 to estimate the monthly amount to save. http://www.choosetosave.org/ballpark/

 

A Retirement Estimator for Farm Families

This is a calculator designed especially for farm families. It will help you calculate your income and expenses in retirement. Then it will provide a recommendation about whether you can afford to retire. You can print the worksheet and keep a record of your information. You can go back and change your estimate for any of the amounts that you entered. http://www.ces.purdue.edu/farmretirement

 

Financial Calculators

This is a site with 100 Financial Tools (calculators) to help with: budget, savings, credit cards, pay check planning, college, business, auto, home mortgage, home equity loan, retirement, stock, mutual fund, Roth IRA, and life insurance. The tools are arranged by age groups: youth and young adults, age 20 to 39, age 40 to 59, age 60 and over. The site is sponsored by the American Savings Education Council. http://www.choosetosave.org/calculators/

 

Checklist for estimating the amount of income needed in retirement.

ü      Keep a record of current spending.

ü      Think about potential changes in spending after retirement.

ü      Think about changes in income.

ü      If needed, think about what adjustments to make.