Setting your retirement income goals

Did you know only 48 percent of workers say they and/or their spouses have taken the time to complete a retirement needs calculation?* Knowing the amount of retirement income you will need can play a significant role in helping you reaching your financial goals. Take a look at your specific situation to determine how much you should ideally contribute to your retirement account.

Determining how much retirement income you will need involves your annual salary and how long you expect to be retired. Financial professionals suggest you accumulate at least 75 to 80% of your current annual income  for each year of retirement.
 

People live longer these days, so retirement could be longer than it used to be — as many as 20 or more years longer!
 

Retirement income goal example:
Annual salary: $45,000
Annual Retirement Income Goal: $45,000 x 80% = $36,000
Number of Years in Retirement: 25 years
Total Retirement Income Goal: ($36,000 x 25 years) = $900,000

Inflation erodes the buying power of money over time. So, when estimating how much you’ll need to retire, it’s important to consider how inflation will impact the value of your account. Using a conservative annual inflation rate of 3 percent and assuming retirement is 35 years away, let’s see the impact on our example.
 

Inflation example:
Retirement income goal = $900,000 
Inflation rate: 3% = 1.03
Years until retirement: 35
Inflation adjusted retirement income goal: (1.0335) [The inflation rate multiplied by itself 35 times] x $900,000 = $2,532,476