Am I Behind On Retirement Savings? How To Calculate Your Number

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You've just realized retirement isn't that far off, and now you're asking if it's too late to start your retirement planning at 40. By the end of this episode, you'll know how to figure out where you are in the retirement planning process and the next step you should take So you've been busy with your career, kids, right? It's midlife. We bought a house, sold a house, life has just been happening. And now, as you're getting to the stage where you might have one or two left in the household, you're realizing, "Ah, we're heading to our empty nest years." Oh, man. Do you know what the next milestone is after that? Retirement. So then your mind kind of starts spiraling in a sense, and you're like, "Retirement. Have I done enough? Have I done the right things?" And then you ask, "Is it too late?" So asking that question, you go to Google. You ask Google, "Is it too late?" You read some blogs. You listen to some podcasts. May have been how you found me. Welcome. Glad you're here. And then in the midst, you see a few retirement calculators, and you're like, "Okay, I'm gonna give those a go. This will answer my question." This is my client. She... On the call before she joined my str- retirement strategy session, she says, "I did one of those retirement calculators. It says I need four million. I don't... I'm never gonna make it." She's in this panic, and I said, "Hold on a minute. Do you know how it was calculated to that four million?" And she's "I don't. It just said I needed four million." And I said I'm not sure what those inputs were." As a number person, I'm always like, "What was it feeding?" I'm not saying that four million wasn't correct by that calculator, but we don't know the inputs. So I said, "Let me help you walk through this real quickly. We'll calculate how much you need," and it was nearly half of that amount. And I said, "I know this amount is correct because I know the inputs." Again, we're estimating and projecting those amounts, but I said, you don't need that much more." So she jumped into my retirement strategy session so we could dial in to really get a true number. So the first step, if you're, like, just getting to this subject. You're like, "Ah, am I behind? Am I too late? I don't know what to do," your first step, you must get clear on where you're at in the retirement process, okay? The path. You have where you're starting from, and you're not starting from zero, cause you've been working for a while. Hopefully you've had some employer matches that you've been taking advantage of. You've worked several jobs, have had a 401. So you need to get clear on, what do those amounts say I'm going to have if we project them under, underestimating what the market's gonna return, and then how much am I going to need? That's what is very important, and that helps identify your gap. It's not a, "Oh, you're behind. Oh, you're too late." It just says, "This is how much more you need." Now, I don't love when it says how much do I need to have saved by 40? How much do I need to have saved by 50?" I don't know. I don't know how much you make. I don't know how much you spend, right? These are the things with those, "I just want a number." You need a number that is made up of your numbers. Retirement savings is just as personal finances such as budgeting, your budget does not look like somebody else's. Your spending does not look like somebody else's, therefore, your retirement savings and the total you need is not a standard by the age of 40, 50, or 60, there's many different things that feed into that But there is a very simple way to get you even to that first step, even to like, "Okay, how much do I need?" Again, for me, it's all about personalization. It's all about who are you, what are you doing with your money, and how does that translate to retirement? So I'm gonna walk you through the same calculation that I walked my client through that I just shared about earlier. It's called the rule of 25. Everyone's like, "Where's this rule?" If you search the FIRE community, which means financial independence retire early, they've been using this calculation for years, and this is so that, individuals can retire at the age of 35 or 40. So they have put it to the test, you don't need some fancy software. You don't need some fancy calculator, and even if you do get that calculator, does it tell you what to do next? That's the important thing. "Okay, I'm learning something, but then how do I know what to do next?" So rule of 25. I'm gonna walk you through this, so if you need to come back and listen to this, get out a piece of paper. It's not difficult. There's just three numbers that we need. Okay? You need to know how much you are spending every month. I use current expenses if you're still 15 years out, we can project a little bit for retirement, but it's easier to say, "The way I spend is the way I'm going to spend in retirement." Using your current expenses, I want to maintain my lifestyle, use your current expenses. So get clear on how much you're spending every single month. That's your expenses. And in those expenses, you need bills, you need your spending, and you need the savings amount for your sinking funds. At a minimum, those are the three categories that you need to create a solid number for you for right now, step one. I want you to know this is my first effort. Even if it's your third or fourth, this is just my effort. That is what I want you to have. Okay, so you have a monthly amount. I want you to multiply that by 12. Essentially, what that is doing is saying, "This is what I spend in a year." So an annual expense, I don't know, you might be at 90,000, you might be at 120, you might be at 200,000. I don't know what you make. I don't know what you spend, but that's not what matters. You have your current expenses, multiplying it by 12, so you now have an annual expense. From that, you're going to multiply by 25, the rule of 25, and this is going to give you your one million, your 1.4, your 1.7, this is how much you need to have saved so you can retire. The rule of 25 ultimately means that you can withdraw 4% safely to live on and not run out of money So this gets you one step closer to retirement. The next step would to be how much is my savings going to grow to in that same time period, so that's your next step. Investor.gov has a compound calculator that will walk you through that. I can also walk you through that on a free call, again, to support you in figuring out that number. That's your next step So a different client than the one I talked about earlier has been going this process from her retirement strategy session to working with me for four months, calculating her retirement, quote, "gap." We're estimating, we're projecting. I wanna talk about that for just a quick second. Budgets are estimated. What we're saving, we're projecting is estimated. And this is something-- this is the reason why I have my clients do it every 90 days to take into consideration actual market change and actual spending change, there's these things that we have to keep refining and doing and growing. And so she had done this and at her four-month mark, we went back after we had done all the work, and she had done-- we'd done this initially in her strategy session. We went back. We recalculated. Again, we do this every 90 days. Her gap was $20,000. From her estimated spending or what she's going to need to her projected savings, she was $20,000 shy. What this meant what this means is that she can either dream bigger, put more expenses in there. She doesn't need to technically add another dollar to retirement contributions, and so she can focus on what she has been putting off for the here and now, for the next five to ten years, there are some projects she wants to do. She can easily step in and do that. But knowing where you're at every 90 days is going to support you in many ways. First off, you're gonna know where you're at. Secondly, you're gonna know what the progress truly looks like and that you are progressing so that you can recognize, like her, if you need to make a bigger shift. "I get to dream bigger. I don't need to not spend," or, "You know what? I'm gonna hold off on increasing my retirement saving contributions," because my client is getting raises every single year, which also includes employer match, so that's gonna add to it. See what that's gonna happen. And then what the market truly does because we under-project that. It's just the way I've been doing budgets for years and estimates for years. I love to underestimate, so when you get the actual progress back in there in 90 s- 90 days, you can see, "Oh, man, what I am doing is working." And, like my client, make this beautiful shift to, "I either get to dream bigger, or we get to do a lot of things sooner." So what I want you to actually take away from this episode is that it's not too late, but you need to know where you are at in the planning path, you need to know where I'm at between how much do I need and how much will I have saved. So if you're stuck asking yourself and maybe others you're reaching out for that help, if it's too late to save for retirement, I want you to book a call at elevatefinances.us/call to see if the retirement strategy session is the best next step for you. We're gonna spend 30 minutes determining where you are in that retirement planning process and what the next money move is to get you moving forward. That's all you need to do. That's it for this one. We'll see you next week. /p>

You’ve been busy building a career, raising kids, buying houses, changing jobs, and simply living your life. Then one day, you realize retirement isn’t some distant milestone anymore.

That’s when the questions start.

Am I behind on retirement savings?

Have I saved enough?

Did I do the right things with my money?

Is it too late to save for retirement at 50?

If you’re a Gen Xer asking these questions, you’re not alone. But before you panic or start randomly throwing more money into your retirement accounts, you need to know one thing:

Your retirement number is personal.

There isn't one amount everyone should have saved by 40, 50, or 60. Your number depends on your lifestyle, your spending, your retirement timeline, and the resources you already have.

So instead of asking, “Am I behind?” start with a better question:

What will I actually need for the retirement I want?

Why “How Much Should I Have Saved by 50?” Isn’t the Best Question

You’ve probably seen the rules telling you how much you’re “supposed” to have saved by a certain age. But those benchmarks don't know anything about you.

They don't know how much you earn.
They don't know how much you spend.
They don't know when you want to retire.
They don't know what kind of lifestyle you want in retirement.

And they certainly don't know how much you already have saved or what other income sources you'll have.

Retirement savings is personal, just like your household budget is personal. Your spending doesn't look exactly like someone else's. Your retirement doesn't need to look like theirs either. That means a generic savings benchmark can't tell you whether you're actually behind.

You need a number based on your numbers.

How to Calculate Your Retirement Number

One simple starting point is the Rule of 25.

The calculation only requires three steps.

Step 1: Calculate Your Current Annual Expenses

Start with what you're spending now.

If you're still several years away from retirement, you can make adjustments for how you expect your lifestyle to change. But using your current spending is often a practical place to begin.

Add up your monthly expenses, including:

Household bills
Everyday spending
Lifestyle expenses
Sinking funds for larger, irregular expenses

Let's say your household spends $8,000 per month.

Multiply that by 12: $8,000 × 12 = $96,000 per year

Now you have an estimate of your annual retirement spending. Yes, you will need to adjust this as you get closer to retirement and better understand what it will look like.

Step 2: Multiply Your Annual Expenses by 25

This is where the Rule of 25 comes in. Take your estimated annual expenses and multiply them by 25.

Using our example: $96,000 × 25 = $2.4 million

That gives you a starting estimate of $2.4 million as your retirement savings target.

The Rule of 25 is based on the idea that you could withdraw approximately 4% of your portfolio annually.

It's important to understand that this is an estimate, not a guarantee. Investment returns, inflation, taxes, longevity, withdrawal rates, and your specific retirement circumstances all affect how much you'll actually need.

But it's a useful way to move from vague anxiety to an actual number.

Step 3: Compare What You'll Need With What You're Projected to Have

This is the step many retirement calculators skip over or make difficult to understand.

Knowing your retirement number is only half the equation.

You also need to ask: How much will I actually have by the time I retire?

Look at your current retirement savings and project what those accounts could grow to over your remaining working years.

You can use a compound interest calculator to estimate this based on your current balance, contributions, timeline, and an assumed rate of return.

Now you have two important numbers:

What you'll need

versus

What you're projected to have

The difference between those numbers is your potential retirement gap.

And that gap is much more useful than simply being told you're “behind.”

What If Your Retirement Number Feels Huge?

This is where I see people panic.

I had a client who used a retirement calculator before our retirement strategy session. The calculator told her she needed $4 million. She immediately thought, “I'm never going to make it.”

But there was a problem. She didn't know how the calculator had arrived at $4 million. What assumptions did it use? How much did it assume she would spend? When did it assume she would retire? What rate of return did it use? What other income sources were included?

We didn't know.

So instead of accepting that $4 million number as fact, we walked through the above calculation using her actual numbers. Her estimated retirement target was nearly half of what the calculator had told her.

That doesn't mean the original calculator was necessarily wrong. It means the inputs matter. A retirement number without context can create fear instead of clarity.

Is It Too Late to Save for Retirement at 50?

If you're asking, “Is it too late to save for retirement at 50?” don't let that question stop you from figuring out where you stand.

Being 50 doesn't automatically mean you're behind or automatically mean you're on track. What matters is knowing your starting point and what needs to happen between now and retirement.

You may discover that you need to increase your savings.
You may discover that working a few additional years changes the picture significantly.
You may discover that your current spending is higher or lower than you realized.
You may discover that you have more resources working toward retirement than you thought.

And you may discover that you're actually closer than you expected. You won’t know until you run your numbers.

Retirement Planning for Gen X Requires More Than a Savings Goal

For Gen X, retirement planning isn't simply about reaching a magic savings number. It's about understanding how today's money decisions affect the life you want tomorrow.

That means looking at:

What you're spending today
What you're saving
Your current retirement balances
Your expected future contributions
Employer matching contributions
Your desired retirement lifestyle
When you want to retire
Other potential sources of retirement income
The gap between what you'll need and what you're projected to have

And here's something else that's important: Your retirement plan isn't something you calculate once and put in a drawer.

Your spending changes.
Your income changes.
Your retirement contributions change.
Your investments change.
Life changes.

That's why I like a 90-day approach to retirement progress.

Stop Asking If You're Behind. Start Asking What Your Numbers Say.

If you've been wondering, “Am I behind on retirement savings?”, don't start by comparing your savings to someone else's benchmark.

Start with your own numbers. Calculate what you're spending. Estimate what you'll need. Project what you're likely to have. Then look at the gap.

That gives you something much more valuable than a generic age-based savings target.

It gives you a starting point for deciding what to do next. And that's really what retirement planning is about.

Not getting one perfect number.
Not following someone else's formula.
Not panicking because an online calculator gave you a number you don't understand.

It's about knowing where you are, knowing where you want to go, and making the money moves that help connect the two.

Retirement isn't one big decision. It's a series of decisions you make over the years leading up to it.

Start with your numbers. Then decide what needs to change.

Ready to Find Your Retirement Number?

If you're tired of wondering whether you're behind and want to understand where you actually stand, a Retirement Strategy Session can help.

We'll look at where you are in the retirement planning process, calculate your starting retirement number, and identify the next money move that can help you move forward. Because you don't need more guessing.

You need a strategy you can trust.

How Do I Get Started?