Key Takeaways
- Your lifestyle in later life will reflect how well you plan for it.
- At least three retirement planning calculators should be used to determine how much to save.
- There are seven key variables in retirement planning calculators including age and life expectancy.
- Other factors to consider are inheritances, health status, and changes in household expenses.
- Retirement planning also needs to consider planned uses of free time and lifestyle changes.
An important financial goal for investors is retirement planning. Ideally, people should save enough money for what could be three, or even four, decades of life after leaving full-time work. Retirement is anything but a one-size-fits-all experience, however, because personal priorities and retirement resources (e.g., a pension and employer retiree health insurance) vary widely.
How much money do you need to retire? It depends. While guidelines like 70% to 80% of pre-retirement income are a useful starting point, personalized calculations are much better because no rule of thumb fits everyone. Some people can live happily on half their pre-retirement income while others require 100% (or more) to maintain, or even enhance, their lifestyle.
There are three distinct phases of retirement: active, passive, and final. Expenses during early active phase can equal or exceed those during the years before. Often, expenses decrease in later years but may increase again during the final phase of life due to medical and/or long-term care costs.
Retirement analyses should be accurate enough so people neither save more money than they need nor have to drastically lower their standard of living. It is best to use at least three online calculators because their assumptions and data inputs vary. Key factors within most retirement savings calculators are described below.
7 Key Retirement Planning Variables
Current Age
Combined with planned retirement age, this data input indicates how much time people have left to save before retirement. For example, current age of 35 and planned retirement age of 67 = 32 years. The best time to start saving for retirement is in your 20s, but the next best day is today.
Planned Retirement Age
The earlier people retire, the fewer years they have to save and build retirement benefits (e.g., pension and Social Security). There are also fewer years for savings to grow before being withdrawn for income and a longer time frame to sustain themselves on invested assets. The reverse is also true for later retirement ages: higher formula-based benefits, more time to save and for savings growth, and a shorter savings withdrawal period.
Annual Income Needed
This is the percentage of pre-retirement income that retires want to replace (e.g., 80%), expressed as a dollar amount. When using a retirement planning calculator, you are trying to estimate the amount of savings needed to cover the gap between the annual income you need and money from guaranteed income sources such as Social Security and/or a pension.
Assumed Average Annual Return
Savings analyses should reflect rates of return earned on all investments combined, i.e., a weighed average. For example, a portfolio with 60% in stocks earning 10%, 30% in bonds earning 5%, and 10% in cash assets earning 3%. To determine the weighted average, multiply the weight by the return for each asset: 0.60×0.10=0.06 (stocks) + 0.30×0.05=0.015 (bonds) + 0.10×0.03=0.003 (cash) = 0.078 = 7.8%.
Life Expectancy
Many people live well into their 80s or 90s. Since no one has a crystal ball, the next best thing is life expectancy estimates using personalized calculators that ask questions about height and weight, blood pressure, personal health habits (e.g., diet, exercise, sleep habits, and smoking) and personal and family health history. An example is the Living to 100 Life Expectancy Calculator.
Amount of Money Already Saved
With this information, a calculator can project what current savings will be worth at retirement age.
Obviously, the more money people have already saved for retirement in taxable (brokerage) accounts, Roth and/or traditional IRAs, and qualified employer retirement savings plans such as 401(k)s, the less they’ll need to save in the future to reach their target number.
Anticipated Income Sources
Retirement calculators often ask users to include anticipated income from other sources including rental income, part-time work, a pension, and Social Security.
When including other sources of income in a retirement savings calculation, be conservative and realistic. If you plan to sell your home at a profit to increase your savings nest egg, subtract the cost of a new house or condo, plus moving expenses. If you plan to work during retirement, planning should reflect the fact that you may only be able to do this for a certain number of years.
But Wait…There’s More
The more data inputs, the more precise a retirement savings analysis. Many retirement calculators, such as the FINRA Retirement Calculator, also include fields for current annual income, an estimated inflation rate, and current and retirement age income tax rates. Another data input in some calculators is the amount of employer matching on workplace savings plans.
Other Things to Consider
Inheritances
Inherited money can significantly increase retirement savings. However, there are too many unknown factors, such as a donor’s health and longevity, to count on inheritances as a source of retirement income. Inheritances should not be included in a retirement savings analysis unless a donor is actively divesting assets and making lifetime gifts.
Health Concerns
When you are in good health, it is reasonable to expect that you’ll live an average life expectancy or beyond. However, when you’re diagnosed with a life-threatening disease, retirement plans can change. Some people move up their planned retirement date to retire while they can. Others reduce their work hours and, hence, income and retirement savings, because they want to or have to (e.g., fatigue).
Housing Changes
A key component of the annual income needed in retirement is housing costs. Retirees often lower their housing expenses by trading down to a smaller home with lower maintenance costs, property taxes, and utilities or moving to a less expensive location in the U.S. or even abroad.
Another option to generate needed income is a reverse mortgage where borrowers can receive a lump sum, monthly payments, or a line of credit. Interest on reverse mortgages is typically repaid when borrowers move out of their home, sell it, or die.
Changes in Expenses
Some expenses end or decrease in retirement. Common examples include: commuting costs and business travel, union and/or professional dues, retirement plan contributions, work-related expenses and clothing, and commuting expenses.
Other expenses are likely to begin or increase. Common examples include: travel, entertainment, and hobbies, medical and dental expenses, Medicare and health insurance premiums, and gifts to children and/or grandchildren.
Retirement Planning Resources
Social Security Benefit Statement
To get a projected benefit to use in retirement calculators, download a personal benefit estimate from the Social Security Administration website. Estimated annual benefits are provided for ages 62 through 70.
Pension and Qualified Plan Statements
To get an estimated benefit, contact the administrator of your pension or qualified employer plan (e.g., 401(k). Another helpful resource is a Summary Plan Description (SPD), which is a document that explains how a retirement plan works and what benefits participants are entitled to receive.
Books
There are almost 5,700 books about retirement planning according to Amazon. Five of my favorites are Retirement Planning Guidebook (Pfau, 2026), Retire Today (Keil, 2025), How to Retire (Benz, 2024), The New Retirement Savings Time Bomb (Slott, 2021), and (shameless self-promotion!), my book Flipping a Switch (O’Neill, 2020).
Financial Calculations
Similarly, there are many available online retirement planning calculators and “paper and pencil” worksheets. Among my favorites are:
- Estimate Your Expenses and Income in Retirement (TIAA)
- Retirement Calculator (Calculator.net)
- Retirement Calculator (FINRA)
- Retirement Calculator: Estimate How Much You Need to Save (Bankrate)
- Retirement Income Calculator (Vanguard)
- Saving For Retirement Worksheets (DC.gov)
Retirement Planning Tips
Envision the Future
Future plans impact annual retirement income needs. Don’t wait until you’re ready for retirement to figure out what you want to do with your free time. Start thinking about life after full-time work at least a decade before. Ask yourself questions such as “What do I want to do?,” and “What makes me happy?”
Plan Your Lifestyle
Successful retirees retire to something, not from something. Do you want to stay in your current home, move to an older adult (55+) community, or move closer to family members? How will you spend your time, e.g., traveling, starting a business, volunteering?
Downsize Your Debt
Experts recommend paying off your mortgage prior to retirement age. Not having this large monthly expense can help retirees who are living on less income (than they had while working) make ends meet. Ditto for consumer debt such as outstanding credit card balances or a car loan.
Final Thoughts
Retirement planning is an ongoing process. Remember, a comfortable retirement does not just happen. Your lifestyle as an older adult will almost certainly depend on how well you’ve planned for it.
