The retirement calculator can give us a general estimate for how much money we should have to live a comfortable retirement. Are you on track? The amount this calculator comes up with seems is surprisingly high. So how is does it come up with this amount?
So in an ideal situation we should have enough money to live on 80% of our final income prior to retirement. So if you and you spouse or partner were making 200,000 dollars at age 65, you would want to have enough money saved to live on 80% of you final income (or in this case $160,000), and you may need it to provide this amount for 20-30 years. So if I plug in 200,000 income and set the age to 65, it says I need approximately 3,000,000 dollars for my retirement. So, 80% of the final income of $200,000 is $160,000 and financial advisors usually like to limit the draw on you savings to 4%, this is so in theory you should not run out of money if you only draw 4% per year. So 4% of $3,000,000 is $120,000, but remember you have social security this should bring you up to the $160,000 you will need to live on. If it seems that after you have run the calculation you are off track you are not alone. Only 52% of people believe they will have enough money in retirement.