Overview: Learn how to develop a personal savings target without treating a generic rule as a guarantee. Retirement planning is personal, so use this guide as a framework for questions and decisions rather than a one-size-fits-all answer.
Start with spending, not a magic number
A retirement goal depends on the lifestyle you expect, when you stop working, how long retirement lasts, and which income sources you can rely on. Start by estimating annual spending in today’s money.
Subtract other income
Pension benefits, government payments, rental income, and part-time work may reduce the amount needed from investments. Consider whether those income streams are guaranteed, inflation-adjusted, or uncertain.
Understand common shortcuts
Some people use rules of thumb such as multiplying annual portfolio-funded spending by 25. Such shortcuts depend on assumptions about returns, withdrawals, inflation, fees, taxes, and retirement length. They are not personal recommendations or guarantees.
Allow for inflation
If prices rise over time, the same lifestyle will cost more in the future. When comparing figures, be consistent: use either today’s purchasing power or future nominal dollars.
Build a range of scenarios
Create cautious, moderate, and optimistic projections rather than one precise target. Revisit them as you receive new information and as circumstances change.
Turn the goal into a monthly habit
Use our calculator to test different monthly contributions and timelines. A sustainable contribution plan that you can maintain is often more useful than an ambitious target you abandon.
Choose one action from this guide, write down the information you need, and schedule a date to review it. Consider speaking with an appropriately qualified professional for your specific situation.
This article is general educational information. It is not individualized financial, investment, tax, or legal advice, and does not promise results.