Retirement Readiness: Monitoring Your Progress

As you plan for retirement, it's a good idea to keep track of how much you are saving. But, equally important, you should understand how much spending your savings can support during retirement. Dimensional's My Retirement Income Calculator is designed to help you estimate future retirement income, and monitor progress towards your goals. Let's consider a 35 year old with $100,000 in annual income, and $50,000 in savings. She currently saves 6% each year and receives a 3% match from her employer, and she plans to retire at age 65. Based on her current balance, expected future contributions, and assumed investment returns, she could expect approximately $26,000 of real retirement income per year. The calculator can also help you see how certain choices may impact expected income. For example, if she increases her savings to 8%, to get an additional 1% match from her employer, her expected retirement income can increase by more than $6,900 a year, around 25% more. If she works an additional year, she could increase her retirement income by about $1,600 per year, almost 5% more. If the employee is eligible for Social Security benefits, the calculator can factor that in as well. You can also use the calculator to evaluate the impact of other decisions, such as a large purchase. Consider a 45 year old making $100,000 a year and with $125,000 in savings. The decision is whether to buy a $50,000 car or a $25,000 car and save the difference. By choosing the lower cost car, and keeping $25,000 invested toward retirement, this employee could expect about $2,000 more in retirement income per year. Dimensional's My Retirement Income Calculator focuses on what matters in retirement: income. The tool offers insight into the standard of living your savings may support, and how the decisions made today can help improve your retirement readiness.