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Calculating Retirement Income

First, you need to know how much you can expect from Social Security, pensions, annuities or other retirement vehicles. Make a list of all of your sources of retirement income, and estimate what the monthly benefit will be.

1. LIST SOURCES OF INCOME:

   Social Security:
   
   The Social Security Administration sends every adult over the age of 25 a statement with their projected Social Security benefits.

   Pension:
   
   Contact the plan administrator of any pension plan you have participated in to determine how much your benefit will be.

   IRA and 401(k) plans:
   
   Look at your total IRA and 401(k) savings and estimate how much monthly income you can withdraw from savings.

   Other Income:
   
   List Sources.

   Next, ask yourself three important questions:
   
   

   1. Can you count on getting the income for life?
   2. Will the income keep up with inflation?
   3. Can some or all continue to your surviving spouse?

2. CALCULATE YOUR NET WORTH:

   Estimate the total value of your assets, including cash, home equity, automobiles, other personal property, the value of insurance policies and so on.		_______________
   Subtract the total of your liabilities, including mortgages, credit card and loan balances, home equity loans and other debts from your total assets.	--	_______________
   NET TOTAL	=	_______________

The result is your net worth. Remember, not all of your assets will be available for retirement income unless you sell them or use your home equity as a source of retirement funds.

3. HOW MUCH INCOME WILL YOU NEED IN RETIREMENT?

   Most experts recommend planning for at least 80% of your current pre-tax income in order to maintain your current living standard.

4. WHAT IS THE GAP BETWEEN INCOME, ASSETS AND YOUR RETIREMENT GOAL?

   Next, calculate the gap between income from Social Security, retirement plans and assets and your retirement income goal. The gap represents the amount you will need to save between now and retirement in order to meet your overall goals. How much you need to save each year to fill the gap is a complicated calculation.

You can find two calculators to help you calculate the gap.

• National Association of Securities Dealers (NASD) Retirement Calculator
• American Association of Retired Persons (AARP) Retirement Calculator

Page Last Updated: April 10, 2007