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Retirement tends to be something that most don't think about until it's too late, and that goes for retirement savings too. Our retirement shortfall calculator can illustrate how much you should be saving and if there is a shortfall in your retirement plan.

Follow the suggestions below to learn what you should do if your retirement funds come up short so you can start preparing for the future today.


Why use a retirement shortfall calculator?

You're at an age where retirement is starting to look like it's in the not-too-distant future. You might be saying to yourself, "I wish I could have saved more!"

Luckily, there are always steps you can take to make retirement doable.

A retirement shortfall calculator allows you to enter your savings plan, along with your needs, to check-up on the strength of your retirement strategy.

You can use the calculator to verify your plan for possible shortfalls at the time of retirement.

Using The Calculator

You will need to enter your current savings, monthly contributions, years until retirement and other required details.

Then the calculator will give you an estimate of either a shortfall or surplus at retirement.

If you find that you do have a shortfall, then it's time to devise a plan.

Getting Started

We recommend estimating your annual Social Security benefit in retirement before using the Retirement Shortfall Calculator.

Let's say you're expecting $40,000 per year from Social Security but you think you'll need closer to $65,000 to retire in comfort. That means you'll enter the difference, $25,000, as your required retirement income for a more accurate analysis.

What is a retirement shortfall?

A retirement shortfall is when you see that there's not enough in your retirement savings or investments to cover your monthly expenses once you're no longer earning a living.

If you add up all that you have saved and estimate how long it will last, then subtract from that what your expected expenses with inflation, you'll get an idea of where you stand.

If you're looking like you'll be in the red, then you have a shortfall. But there are steps you can take, and it's not too late.

How much should I save for retirement?

The easiest way to know how much to save for retirement is by using a retirement calculator.

Most experts say your retirement income should be about 80% of what your salary was just before retirement. This, of course, depends on what sources of retirement income you have.

The 4% Rule

A rule of thumb is that your desired yearly retirement income should be 4% of your total savings if you want to fund 25 years of retirement. So for instance, if you think you will need $50,000 a year to live off of, then you should aim to have $1,250,000 saved by the time you retire.

This amount can based on other factors, such as the rate of return on your investments, or if you are anticipating other streams of retirement income.

What is the best retirement strategy?

1. Start Saving Now

It's not too late to start saving, and more. Many people are in a situation where their kids are grown and out of the house. If that's the case, this is the perfect time to put more towards retirement.

If you already have a retirement fund and you're over 50, you can start playing catch up. Allowable contributions to pre-tax retirement funds can increase. In addition, this will lower your taxable income and could put you in a lower tax bracket, which can make saving easier.

Once the kids are grown, you may be tempted to travel more or spend money on those things you weren't able to. Consider what's most important to you, now or later.

And the choice doesn't have to be cut and dry. Even a slight increase in savings can mean an earlier retirement or more money available each month after you retire.

If your company has a matching 401(k) you should be contributing the maximum amount you can. If not, you're costing yourself free money.

You can also set aside additional money straight into a Roth IRA. It's not tax-deferred, but depending on your potential retirement income, it could be a good investment.

2. Retire Later

Even if you're eligible to retire at 62, each year you work past that means an increase in retirement income. In fact, working longer has a greater impact on your retirement fund than contributing money to savings.

How much of an impact? Just a few months more of working means a considerable increase. According to a Stanford University study, based on an average annual salary of about $53,000, if you're 66 and work until 67, your retirement income can increase by 7.75%

If you're 62 and wait four years until you're 67, your retirement income can increase by 32.7%, and if you wait until you turn 70, that increase can be as much as 75%.

There are several other benefits to retiring later:

  • Each year past retirement age means an 8% increase in your Social Security income. This is most helpful for those of us who do not have much of a retirement fund, if at all.
  • If you're not spending your savings, it's continuing to grow.
  • The number of years your retirement fund needs to last become shorter.

Retiring later has the most significant impact on your retirement fund than anything else you can do. But that doesn't mean it's the only thing to do.

3. Evaluate Your Investments

Is always a good idea to talk to a financial advisor about retirement, and calculate your retirement shortfall. They can take a look at what your portfolio looks like and make adjustments so you're getting the most bang for your buck.

As you age, the types of investments you have should change and diversify in a different way. For instance, moving some of your funds from high risk to lower risk as you approach retirement, is a common decision, and with good reason.

A financial advisor will help make sure that funds are available when you need it most.

What if I want to retire but don't have enough savings?

1. Work Part-Time After Retiring

What are you going to do with all that free time anyway? There are only so many hours you can spend gardening and visiting grandkids. Yes, this is your time to do all those things you put off. But you can still work part-time and do those things.

Some employers appreciate all your years of experience, and training new employees is time-consuming and expensive. So, most employers are happy to keep employees past retirement age on a part-time basis.

This will continue to put off Social Security and allow your retirement fund to grow more.

2. Downsize

If you're an empty nester, your nest doesn't have to be so large. I know you had thoughts of passing on your home to your kids. And they did too. But you should think about yourself and your own needs first and foremost.

There are a few downsizing options. If you have a home that's already paid off, you can sell it, use a portion for a smaller home, and put the rest in a retirement fund.

If it's not paid off, you can still sell it, but the amount of money that will go towards another home and retirement will be less. There's also nothing wrong with taking out a long mortgage.

If you're up to it, you can rent your home out and downsize. The money you make from turning your home into a rental property can often pay for both mortgages. If not, you'll still have a lower mortgage with a small house.

Keep in mind that the first $250,000 is exempt from capital gains tax when you sell your home, $500,000 if you're married.

You can also sell off some assets and reinvest. Again, think about what's most important to you and your needs.

Final thoughts?

If you are coming to terms with the fact that your retirement funds might be insufficient, the good news is that you're coming to terms with that.

Some people choose to ignore this situation until it's too late. So you're being smart.

If you follow the above suggestions, you will be able to retire and can plan for a lifestyle that's comfortable.

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