There's a lot of conflicting advice about what percentage of your income you should set aside for retirement. Some sources say 10% to 15%, and others say 15% to 20%. It would be nice if planning for retirement were this simple, but it's not.

It's certainly better to set aside 10% of your income than nothing at all, but if you want a truly accurate estimate of how much money you need for retirement, you have to do a little math, or at least know your way around a retirement calculator.

How to calculate how much money you need for retirement

The first step is estimating how long your retirement will last. This is the least exact part of planning for retirement because you never know how long you're going to live, and available statistics may have little bearing on you personally. However, they can be useful as a starting point.

The average life expectancy in the U.S. is 78.6 years, but if you're a healthy person, you should figure higher. One in three 65-year-olds today will live past 90 and one in seven will live past 95, according to the Social Security Administration. Once you've chosen your estimated life expectancy, subtract the age at which you plan to retire to determine how many years of retirement savings you need.

Man surrounded by question marks

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Next, total your estimated living expenses in retirement. This may include housing costs whether that's a mortgage or rent, utility bills, groceries, travel expenses, and insurance. Some of your expenses may decrease in retirement while others may increase. Once you have your estimate, multiply this by the number of years of your planned retirement, adding 3% per year for inflation. Most retirement calculators do this so you don't have to do this math manually. It should also tell you how much you need to save overall and per month, based on your estimated investment rate of return. You can use a figure between 7% and 8% to be optimistic, or between 5% and 6% to be more conservative.

Then, subtract the retirement income you expect from other sources like Social Security or a pension. Your Social Security benefit depends on your earnings history and the age you are when you begin taking it. You can claim Social Security as early as 62, but you won't receive your full benefit per check unless you wait to claim it until your full retirement age (FRA), which is 66 or 67 depending on your birth year. If you start at 62, you'll receive only 70% or 75% of your scheduled benefit per check, depending on your FRA. The longer you wait, the more the amount rises until you hit 100% at your FRA. If you delay benefits beyond your FRA, your checks will continue to grow until you receive the maximum benefit at age 70. This is 124% or 132% of your scheduled benefit, depending on your FRA.

You can estimate your Social Security benefit amount by creating a My Social Security account. Once you know what your monthly benefit will be, you can multiply this by 12 to get your annual benefit, and then multiply by the number of years of your retirement to determine your estimated lifetime benefits. Subtract this from your total estimated retirement expenses.

The remainder is what you need to save, but you may not have to do it all alone. If your employer matches some of your 401(k) contributions, that relieves some of the burden on you. Your retirement calculator should help you estimate how much you need to save per month to hit your retirement goal. Subtract any employer match you receive from this amount to figure out how much you need to save on your own.

How to get your retirement savings back on track

If after doing these calculations you find you're not saving enough for retirement, try to increase your contributions. You may have to make some lifestyle changes to free up the cash, like working overtime, picking up a side hustle, or reducing your spending on extras like clothing or dining out.

Be sure you're taking advantage of any employer 401(k) match that's available. It's free money, after all so contribute at least enough to get the full match, or if that's not possible, contribute as much as you can and try to raise your contributions by 1% of your income per year. 

If there's no way to spare more cash today, you may have to think about making changes to your retirement plan. You could delay retirement by a couple of months or years, plan to downsize your home or move to a more affordable area, or work part-time in retirement so you don't strain your savings.

Everyone's retirement plan is different, and so is the path they take to get there. Don't just rely on an arbitrary number that may or may not suit you. Instead, take the time to develop a personalized retirement plan and reevaluate it periodically to ensure it's still right for you.