Here's How to Catch Up — Starting Today
Hey guys! Let me start with something important: if you feel like you're behind on retirement savings, you are NOT alone. According to a study by Bankrate, about 57% of Americans feel exactly the same way! But this post isn't about making you feel guilty about not starting sooner. It's about getting clear on where you stand RIGHT NOW and making a plan to move forward.
By the time you finish reading, you'll know exactly how to figure out what you actually need for retirement (spoiler: it's probably not the random $1-2 million number you've heard thrown around) and how to start taking action TODAY. Because remember - the best time to start investing was 10 years ago, but the second best time is now!
Why Guessing Isn't a Retirement Strategy
Let's be honest - most of us either:
- Completely avoid thinking about retirement because it feels overwhelming, or
- Just assume it'll somehow magically work out
I was totally guilty of this until I was 26 and realized I did not have a plan for my retirement savings and time was slipping away.
Here's why knowing your actual "retirement number" is crucial: it gives you control, motivation, and serious peace of mind. When you have a specific target, you can create a realistic plan to hit it.
And let's address the elephant in the room - Social Security alone isn't going to cut it for most of us. As of February 2025, the average retired worker receives about $1,980 in Social Security each month—that’s less than $24,000/year (bankrate.com)... Do you think that’s enough to live on in retirement? Personal savings and investments are absolutely key if you want to maintain your lifestyle in retirement.
How to Calculate What You'll Need for Retirement
One thing that drives me CRAZY about traditional retirement advice is how it treats everyone like they're the same person with identical needs. Your "retirement number" is super personal! It's based on YOUR lifestyle, when YOU want to retire, and how much YOU expect to spend.
Here's a simple formula to calculate your retirement number:
Retirement Number = Expected Annual Spending in Retirement x 25
This calculation comes from the trusted 4% rule - the idea that you can safely withdraw 4% of your total retirement savings each year without running out of money. So if you flip that around, you need 25 times your annual expenses saved up (since 1 ÷ 0.04 = 25). The 4% rule is based on The Trinity Study (forbes.com), which used historical stock market data to test the success rate of different safe withdrawal rates and portfolio allocations.
For example, if you think you'll spend $60,000 per year in retirement, you'd need $1.5 million saved ($60,000 x 25 = $1,500,000).
But how do you estimate your annual spending in retirement? Here are some things to consider:
- Housing costs - Will your mortgage be paid off? Are you planning to downsize or move somewhere with a lower cost of living?
- Healthcare - This typically increases as we age, so factor in higher medical expenses than you have now.
- Travel and hobbies - Many people spend more on fun activities in early retirement when they're healthier and have more time.
- Basic living expenses - Food, utilities, insurance, and other necessities (though some costs like commuting may decrease).
A good starting point is to estimate 70-80% of your current spending, but honestly, this varies SO much person to person. Some people spend way more in retirement (hello, travel!), while others spend significantly less.
