Am I on Track for Retirement?
By this point, you have done some of the hardest parts of retirement planning.
You have estimated what retirement may cost. You have looked at where your retirement income may come from. You have built a budget around the life you expect to live.
Now you have to do something with all of that information.
A retirement plan is working when the pieces can reasonably come together. Your savings, income, expenses, retirement date and other resources need to support the retirement you are planning for.
Start With the Retirement Date You Want
Your planned retirement date gives the rest of your plan something to work toward.
If you want to retire at 65, you have a specific point in time when your paycheck is expected to stop and your retirement resources need to take over.
Write down your target retirement age and then ask:
What needs to be true by then?
You may need to have:
A certain amount saved
Your retirement contributions at a sustainable level
Your expected retirement income established
Major debts reduced or paid off
A retirement budget you can realistically live with
A plan for healthcare
Enough flexibility to handle unexpected expenses
This turns retirement planning into a series of things you can work toward rather than one enormous question about whether you have “enough.”
Your target can also change. You may decide you want to retire earlier, discover that working longer makes more sense financially, or realize that the retirement you originally imagined has changed.
The important part is knowing what your current plan is actually trying to accomplish.
Find the Pressure Point
When a retirement plan is not working the way you want, the problem usually comes from one or more specific areas.
Look at your plan and ask which of these creates the most pressure.
Your savings may be too low.
may have less accumulated than you expected for your age and retirement timeline.
Your contributions may be too low.
You may have a reasonable balance today but aren't adding enough to keep building toward your target.
Your retirement date may be too close.
An earlier retirement gives you less time to contribute and may require your savings to support you for more years.
Your expenses may be too high.
A retirement budget that costs more than your expected income and savings can comfortably support creates a larger gap.
Your retirement income may be lower than expected.
Your Social Security estimate, pension or other income may not cover as much of your expenses as you originally assumed.
Debt may be putting pressure on the plan.
A mortgage, credit card balance, car loan or other debt can continue taking money from your retirement budget.
Your plan may depend on too many assumptions.
If everything only works under a very specific set of circumstances, there may be little room for unexpected changes.
Finding the pressure point is more useful than simply labeling yourself “behind.”
Once you know what is causing the problem, you can look at the options that address it.
Match the Problem to the Solution
Different problems call for different responses. These are some common concerns that happen as people near retirement, and some ways to mitigate the risk.
If you discover... | Look at these areas |
Your savings are too low | How much you can increase contributions, employer matching, your retirement timeline, and whether your expected retirement spending needs to change |
Your contributions are too low | Increasing your contribution percentage, automatic contribution increases, employer matching, and whether raises or other income increases could support higher contributions |
Your retirement date is too close | Whether working longer would give you more time to save, whether you could increase contributions, and whether your expected retirement spending can be supported by your projected resources |
Your expected retirement expenses are too high | Housing costs, debt payments, healthcare, transportation, discretionary spending, and which expenses could realistically be reduced |
Your expected retirement income is too low | Your Social Security estimate, pension information, other income sources, when those income sources begin, and how much your savings may need to provide |
You have a large gap between income and expenses | Whether the gap can be reduced through lower expenses, additional savings, a later retirement date, additional income, or a combination of changes |
You have significant debt going into retirement | Which debts will remain when you retire, how much they will cost each month, and whether paying them down before retirement would meaningfully reduce your retirement expenses |
You are relying heavily on your savings for income | How long your savings may need to last, how much income you expect them to provide, and whether you have other sources of predictable income |
You have substantial savings but little predictable income | How your retirement accounts and other assets will be used to provide income after your paycheck stops |
Your retirement depends on working until a specific age | What happens if you have to stop working earlier, how your savings would be affected, and whether you have a backup retirement date |
Your retirement plan only works if expenses stay exactly where they are | Which expenses are likely to change, what happens if healthcare or housing costs increase, and how much flexibility your budget has |
Your retirement plan depends on a specific income estimate | Whether the estimate is current, when the income would begin, whether the amount could change, and what happens if it is lower than expected |
You have little room for unexpected expenses | Emergency savings, home repairs, vehicle replacement, healthcare costs, family expenses, and other large costs that could affect your retirement savings |
Your employer match or retirement benefits are limited | How much you are contributing on your own, whether you are taking full advantage of available benefits, and whether your retirement plan needs to rely more heavily on personal savings |
Your retirement plans have changed | Whether your savings target, budget, income needs, contribution rate, or retirement date also need to change |
Your plan looks good today but has very little flexibility | What happens if you retire earlier, spend more than expected, receive less income, or face a major unexpected expense |
You are significantly behind your target | Which changes could make the largest difference based on your timeline, including saving more, working longer, reducing expenses, increasing income, or adjusting your retirement expectations |
You may need to make one change or several.
Working an additional year, increasing contributions, reducing retirement expenses or changing the timing of certain income sources can each affect the overall plan.
This is why there is no single number that can tell you whether you are ready.
Know How Much Time You Have
The same problem can require very different decisions depending on how far away retirement is.
Someone who discovers a savings shortfall at 35 has decades to make adjustments. Someone who discovers the same shortfall at 62 has a much shorter window.
That changes the available options.
With many years before retirement, gradual increases in savings can have time to accumulate. You can also make changes to your career, debt, housing and spending without immediately needing those decisions to produce retirement income.
With fewer years remaining, the decisions become more immediate. Your retirement date, savings rate, expected expenses and future income deserve closer attention.
You can think about your timeline in broad stages:
Time Until Retirement | What Deserves Attention |
20+ years | Building savings, increasing contributions, managing debt |
10–20 years | Savings growth, retirement income, expected expenses |
5–10 years | Retirement date, income gap, healthcare, major debts |
Under 5 years | Actual income, actual expenses, available savings and retirement timing |
Time also gives you information about how much flexibility you have.
If your plan only works when you retire at 62, spend exactly $3,500 a month and experience no major unexpected expenses, it has very little room to move.
A plan that still works if you retire at 64, spend somewhat more than expected or experience a major expense has more flexibility.
Build a Backup Plan
I'm certain you've heard at least once in your life: Always have a backup plan
Retirement needs one too.
You may have a preferred retirement date, but life happens and just because you planned to retire at 65 when you were 30, doesn't mean you will when you're 65. Having plans for best case, less preferred, and worst case scenarios can help prepare for an issue long before it ever happen.
For example, your goal was to retired at 65. But as you're getting closer, you realize you might not have enough savings, or your expenses increased significantly.
So, you gave yourself some options:
Plan A: Retire at 65 with your current savings and expected income.
Plan B: Work until 67 to build a little more savings and keep getting employer matched 401k
Plan C: Retire at 65 but reduce certain expenses if necessary.
Also, give yourself options on the type of retirement you want to have. You can build flexibility into your spending. Some retirement expenses are difficult to change. Housing, utilities, insurance and healthcare can take up a significant portion of the budget.
Other expenses have more flexibility. Travel, dining out, entertainment, hobbies and large discretionary purchases can be adjusted depending on the year.
For example:
Retirement Scenario | Monthly Spending |
Basic | $3,500 |
Comfortable | $4,500 |
Higher-spending year | $5,500 |
Having different spending levels can help you understand what your retirement could look like under different circumstances.
Check Your Plan When Life Changes
A retirement plan can change as your life changes. A new job, a different income, a major purchase, a change in your retirement contributions, or a new retirement date can all affect the numbers you are working toward.
Review your plan when you:
Change jobs
Receive a significant raise or reduction in income
Change your retirement contributions
Buy or pay off a home
Take on significant debt
Get married or divorced
Receive an inheritance
Experience a major family change
Change your expected retirement date
Decide you want a different retirement lifestyle
A regular review can also catch smaller changes before they become bigger problems.
Check your retirement account balances and contributions, review your Social Security earnings record and benefit estimate, update your retirement budget, and check your pension information if you have one.
Then look at the plan as a whole.
Are you still saving enough for the retirement date you want?
Does your expected income still cover your projected expenses?
Has anything changed that could create a gap?
If something has changed, you now have a place to start. You can adjust your contributions, timeline, expenses, income expectations, or other parts of the plan based on what you find.
A retirement checkup gives you a clearer picture of where you stand and what needs attention while there is still time to make adjustments.
Final Thoughts
There is no single savings balance that can tell you whether you are ready for retirement.
A retirement plan works when the different pieces support one another: your savings, contributions, income, expenses and timeline.
If something is putting pressure on the plan, find the source. Then look at the changes that could address it.
You may need to save more. You may need more time. You may need to reduce certain expenses. You may need to rethink your expected retirement income or build more flexibility into your plans.
The earlier you identify the problem, the more options you have.
Up Next: Sometimes that checkup produces an uncomfortable answer. You may discover that your savings are lower than you want, your retirement date is getting closer, or the retirement you want will cost more than your current plan can support.
There are still decisions you can make.
The next article looks at what to do when you haven't saved enough for retirement, including how to approach the problem when you started late, have limited income, are close to retirement or simply have not been able to save as much as you wanted.
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