Are you saving enough to retire? Walk through the five steps below and in five minutes you can come up with a simple yes or no answer.

### Five Steps To Determine If You Will Have Enough To Retire

- What are your total annual contributions to retirement savings?
- Multiply that number by the number of years left until retirement.
- Add your current retirement savings to that number.
- Divide by the number of years you expect to live in retirement.
- Add that to other guaranteed sources of income.

### Example Of Enough To Retire Calculation

The facts:- Couple, age 55.
- Each contribute the maximum amount to their IRA account every year, for a total of $12,000 of IRA contributions each year.
- Have $150,000 saved already.
- They would like to retire at their full retirement age as defined by social security, which in their case would be age 66 and 2 months, but we’ll call it age 67.
- Based on output from a few life expectancy calculators, they expect at least one of them to live to age 94 so they expect to have 27 years in retirement.
- He will have $2,200 per month($26,400 per year) is social security benefits, and she will collect half of this amount ($13,200 per year).

Using their data, you can see an example of the enough to retire calculation below:

- $12,000 (This is their total annual contributions to retirement savings.)
- $12,000 x 12 = $144,000 (Their total annual retirement savings multiplied by years left until retirement.)
- $144,000 + $150,000 = $294,000 (the total expected future retirement savings added to existing savings.)
- $294,000 / 27 = $10,888 (Total future and existing savings divided by number of years you expect to live in retirement.)
- $10,888 + $26,400 + $13,200 = $50,488 (Annual expected retirement income from savings added to other sources of guaranteed income; in their case social security.)

Is that number enough to support your desired retirement lifestyle, yes or no?

Simple enough to retire calculation taken from Michael J. Zwecher's book entitled *Retirement Portfolios, Theory, Construction and Management.*

### Objections To This Simple Enough To Retire Calculation

Some will object that this simple enough-to-retire calculation does not take into account the growth rate on investments, or inflation. For the sake of simplicity, assume a growth rate on safe assets is 3%, and inflation is 3%. Those two variables would then cancel each other out.

It is impossible to accurately predict all of the variables that will affect one's retirement plan over a thirty year time horizon. That's why I think for a starting place this enough-to-retire calculation is, well, good enough!