Will you have enough money to live on when you reach retirement age? It’s a tricky question, considering you don’t know how long you’ll live. So how it is possible to know how much to save right now to make sure you can live out your later years in comfort? A future value retirement calculator could help you with your workings out.

How much does the average American save for retirement?

Before we delve into retirement calculators, let’s consider what the average American is currently saving for retirement. According to this recent CNBC article, which reviews the results from Northwestern Mutual’s 2018 Planning & Progress Study, $1 million is the amount to aim for according to financial experts.

However, the average saved is a little over $84K. In fact, a third of Americans have less than $5,000 saved, while 21% have nothing put aside at all for retirement. Another concerning statistic is that 66% of the Americans who took part in this study said that they believe they’ll outlive their savings.

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How much will you personally need to save?

Your optimal retirement savings amount depends on different factors. Firstly, you’ll need estimate at what age you want to retire and how long you think you’ll live. This is impossible to do entirely accurately of course, but taking into account your current state of health and any hereditary medical conditions or history of family illness may help you reach a best case scenario figure. If it helps, the average life expectancy of Americans is currently 78.7 years!

Then, think about how much money you’ll need to pay your household bills every month when you come to retire. If you’re lucky enough to have paid your mortgage off, you’ll still need to pay for the energy you use, property taxes, home repairs, various insurances, grocery shopping, vehicle costs, phone bills and possibly medical bills. If you plan to rent in retirement, this is another ongoing cost to consider.

When you’ve calculated the bare minimum that you’ll need, add on more money for enjoyment purposes! After all, you don’t want to be just surviving in your retirement.

If you’re eligible for social security retirement benefits, this is income you can factor into your total retirement savings. However, it probably won’t be enough. The maximum monthly social security retirement benefit (as of 2018) is $2,788 which sounds not too shabby – but to receive this amount, you must have had maximum taxable earnings for 35 years and claim it at full retirement age. The average social security payment in retirement is actually $1,413.37 per month.

Giving some thought to the above should help you come up with a ballpark figure of how much you’ll need to save for retirement.

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Retirement savings calculator

Once you have a penultimate figure in mind, it’s time to work out how much you’ll need to save now so that you can reach your savings goal by the time you come to retire.

There are several online calculators that you can look at to predict the future value of your retirement savings. Check out these as a starting point:

  • Retirement Savings Calculator from State Farm – this is a simple tool you can use to enter your current savings, your monthly deposits, the term of your savings plan and the annual rate of return. The calculator shows how much your investment will be worth in the future based on your entries.
  • Future Value Calculator from Calculator.net – this calculator works similarly to the above. Enter the number of periods, the starting amount, your interest rate and periodic deposit to reach a future value.
  • Retirement Savings Calculator from Charles Schwab – if you’d like a more detailed look at your expected retirement fund, this calculator include other elements such as your tolerance to investment risk, anticipated social security benefits, and other future income methods.

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What if you’re not on track to meet your retirement savings goal?

The good news is that by assessing your situation now, you could still have time to put some changes in place so that you will have enough money to live on during your retirement.

Consider saving more money if you can, even if it’s only a small amount each month. Compound interest builds up and can make a real difference to your overall investment amount, especially if you have many years left before you retire.

Revisit your investments to make sure they are performing well enough for you and that you’re happy with the returns you’re getting. It’s worth speaking to a professional financial advisor if you’re not sure, as they may be able to suggest a better retirement planning strategy.

Lastly, working for longer or part-time during some of your retirement years is another way to tackle a deficit in your retirement funds, although this obviously won’t be ideal.

*The information presented above is correct at the time of publishing. We hope you find it useful, but please note that it doesn’t constitute professional financial advice.

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