If you're saving 10% of your income for retirement each year, congratulations! You're doing better than the majority of Americans. But are you doing enough? The short answer is maybe, but probably not. It depends on your life expectancy, your lifestyle in retirement, and whether your company is matching some of your retirement contributions. 

Yet 10% remains a pretty popular standard among today's workers. A recent Transamerica survey found that, of the workers who participate in their employers' retirement plans, the median salary deferral rate is 10%, regardless of company size. The only way to know if this is adequate is to calculate your retirement expenses.

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How to estimate the cost of your retirement

There are four key factors that influence your retirement cost. The first is your life expectancy. Obviously, if you live longer, you'll need more money, because you'll have more years of expenses to cover. The trouble is that you'll never know exactly how long you'll live, so the next best thing you can do is figure high to be safe. Plan to live to at least 90 if you're reasonably healthy. Subtract your ideal retirement age from your estimated life expectancy to figure out approximately how many years your retirement will last.

The second factor is your lifestyle. Everyone will have basic living expenses, like housing, food, and healthcare, but some people will spend more on these things than others. Then there are entertainment and travel costs to consider. Some retirees may be happy with a retirement close to home and their families, while others plan to travel the world. These different lifestyles come with very different budgets.

Again, you'll probably never get it exactly right, but you can estimate your annual retirement expenses by thinking about which expenses will stay the same in retirement, which might go up over time, and which might decrease or disappear. Multiply your estimated annual expenses by the number of years of your retirement, adding 3% annually for inflation. You can do this math yourself, but a retirement calculator makes it easier. 

The third factor is your investment rate of return -- that is, how quickly the money you invest in your retirement account will grow. It's possible that you could see a 7% or 8% annual rate of return, but it's usually better to assume a 5% or 6% rate of return just in case the markets don't perform as you hope. The rate at which your retirement savings grow influences how much you need to save on your own. You'll have to set aside more of your own money to have enough for retirement when you're earning a lower rate of return, while a higher rate of return will reduce the amount you must set aside from each paycheck. 

Most retirement calculators can calculate investment rate of return for you so you don't have to do this math. You should redo your retirement calculations at least once per year to determine if you need to raise or lower your contribution rate based on how your investments have grown compared to your earlier estimates.

The fourth factor influencing your personal retirement costs is money from external sources, like Social Security, a pension, or a 401(k) match. These things won't affect the actual cost of your retirement, but they will influence how much you need to save personally. Every dollar you get from external sources reduces how much you must pay out of pocket for retirement. Your company can provide you information on how much to expect from a pension or 401(k) match if you don't already know this, and you can create a my Social Security account to estimate your Social Security benefits based on your current work record.

The final step is just putting all of this together. Use a retirement calculator to estimate the total amount you must save per month and overall to reach your retirement goals, based on the life expectancy, annual living expenses, and investment rate of return you calculated above. Then, subtract money you expect from other sources to figure out what you must save on your own. It probably won't be 10% of your salary on the nose. It could be less, but with people living longer, living expenses rising, and Social Security facing an uncertain future, there's a good chance you'll need to save more than 10% of your salary to retire when you'd planned.

What if 10% of my salary isn't enough for retirement?

When 10% of your salary isn't enough for retirement, you have two options: You can increase your contribution rate or decrease your retirement expenses. There are multiple ways to do both. Increasing your contributions might just mean upping your salary deferral rate if you can afford to do so. If not, you may want to pursue a raise, start a side hustle, or work overtime to get more money coming in that you can put toward retirement. You can also look for ways to decrease your expenses today, like canceling subscriptions you don't use and dining out less, to free up more cash for retirement savings.

Lowering your retirement expenses could mean reducing your travel plans or downsizing your home in retirement. It could also mean delaying retirement by a few months or years. This has the dual benefit of reducing the length -- and therefore the expense -- of your retirement while also giving you more time to save.

You could also employ a combination of these strategies if that suits you. Play around with a few different scenarios until you find one that works for you. Come back to your retirement plan at least once per year to verify that you're still on track for your goals. Run the numbers again and make any necessary changes to avoid coming up short in retirement.