5 Steps to Know If You’re On Track for Retirement
Figuring out if you’re on track for retirement isn’t as complicated as it seems. It’s about knowing your goal, calculating where you are today, and making adjustments along the way. Let’s break it down.
Step 1: Define Your Retirement Goal
How much money will you need? A simple way to estimate this is by replacing about 80% of your pre-retirement income or using the 25x Rule—multiplying your expected annual expenses by 25 to get your target portfolio size.
For example, if you need $100K per year, you’ll want a $2.5M portfolio ($100K × 25). The earlier you plan to retire, the more you’ll need. But don’t forget about other income sources like Social Security, pensions, rental income, or dividends—they can reduce the amount you need to save.
If you plan to retire at 60 and expect $30K from Social Security and $10K from rental income, your remaining gap is $60K per year. Using the 25x Rule, that means you’ll need $1.5M saved.
Step 2: Calculate Where You Are Today
Take a look at your total investments—401(k)s, IRAs, Roth IRAs, brokerage accounts, and any other assets. Then, calculate your total net worth, including cash savings and real estate, minus any debts.
A retirement calculator (Vanguard, Fidelity, or Personal Capital offer good free ones) can help you project your future balance based on your current savings and expected growth.
For instance, if you’re 42 with $500K saved, contributing $40K per year, and assuming an 8% annual return, you’re on track to have about $2.2M by age 60, which would cover a $100K/year lifestyle in retirement.
Step 3: Compare to Retirement Benchmarks
Are you saving enough? Fidelity’s benchmarks provide a rough guide:
- Age 30: 1x your salary saved
- Age 40: 3x your salary saved
- Age 50: 6x your salary saved
- Age 60: 8-10x your salary saved
If you’re aiming for a $1M+ retirement, here’s a net worth goal to consider:
- Age 30: $100K+
- Age 40: $300K+
- Age 50: $700K+
- Age 60: $1.5M+
At 42 with $500K saved, you’re ahead of schedule for a $2M+ goal by 60.
Step 4: Identify Gaps & Adjust
If you’re behind, don’t panic—there are ways to catch up:
Increase contributions—Max out your 401(k), IRA, Roth IRA, and invest more in a taxable brokerage account.
Invest for growth—If you have 20+ years until retirement, a stock-heavy portfolio (80-100% stocks) can help. If you’re within 10 years of retirement, start adding bonds, cash, or real estate for stability.
Cut unnecessary expenses—Even saving $500-$1,000/month can add up to hundreds of thousands in extra retirement savings.
Diversify income sources—Side hustles, rental properties, dividends, or part-time work can ease the need to withdraw from your portfolio too soon.
Step 5: Run a Stress Test & Finalize Your Plan
Retirement isn’t just about hitting a number—it’s about making sure your money lasts. Consider these final steps:
Test different market scenarios—Could your plan handle a major recession early in retirement?
Use the 4% Rule—This guideline suggests you can safely withdraw 4% per year from your portfolio. If you have $2M saved, that means $80K per year in withdrawals.
Reassess annually—Track your savings, adjust as needed, and shift into safer assets as retirement nears.
Retirement planning isn’t about perfection—it’s about progress. Stay flexible, make adjustments, and don’t wait to start. The best time to plan for retirement was yesterday. The second-best time? Today.
