Please ensure Javascript is enabled for purposes of website accessibility

Are You on Track for Retirement? Here's How to Know

By Maurie Backman - Aug 23, 2020 at 11:52AM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Here's how to tell if you're heading in the right direction as far as your senior years go.

Many people worry about whether they'll have enough money in retirement to live comfortably and pursue the goals they set for themselves. If you're curious as to how you're doing with regard to retirement planning, here are four sure signs that you're heading in the right direction.

1. You've set up a retirement budget

It's hard to know whether you're saving adequately for retirement if you don't know what your senior years are likely to cost you. To that end, it helps to think about where you want to live in retirement, what type of home you want to own or rent, and how you intend to spend your days. Buying an apartment in a major city and spending three months of the year traveling is going to cost you a lot more than it will to settle down in a modest condo in a smaller city and spend the bulk of your time enjoying local entertainment. Think about what you want your senior years to look like and map out a budget so you can see what your annual income needs will entail.

Smiling older man and woman embracing outdoors

Image source: Getty Images.

2. You've come up with a plan for claiming Social Security

Figuring out when to claim Social Security is tricky. File too early, and you'll slash your benefits for life. File too late, and you'll risk missing out on certain goals or opportunities because you waited so long to access that money. But either way, it's important to land on a decision, as that will dictate what your monthly benefits look like. And remember, unlike your retirement savings plan, whose balance can fluctuate over time depending on how your investments perform, the benefit you start out collecting from Social Security is the same benefit you're guaranteed for life (not counting annual cost-of-living adjustments, of course).

3. You've researched your healthcare costs

Healthcare is the one expense that tends to catch seniors off-guard. Though it's impossible to predict exactly what healthcare will amount to for you, Fidelity estimates that the average 65-year-old woman retiring today can expect to spend $155,000 on it throughout retirement, while the average 65-year-old male can expect to spend $140,000. If your health is terrific, you may find that healthcare costs you a bit less. If your health is poor, you might spend more. But either way, it pays to do your research so you understand how much money to allocate to taking care of your health.

4. You're consistently saving a respectable portion of your income

It used to be the case that setting aside 10% of your income in an IRA or 401(k) would be enough to buy you a secure retirement. Not anyone. These days, you're better off socking away 15% to 20% of your earnings (or more) to help ensure that you're able to keep up with inflation and cover all of your eventual needs. If you're currently saving a smaller amount, percentage wise, then it may be time to look at your expenses and find ways to free up more cash for your nest egg.

The knowledge that you're on track for retirement could buy you the peace of mind so many older workers crave. If you don't think you're on track for retirement, take steps to change that so you don't want up disappointed once your time in the workforce eventually comes to a close.

The Motley Fool has a disclosure policy.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 08/12/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.