Get a Ballpark E$timate® of Your Retirement Needs.
The ChoosetoSave.org and American Savings Education Council’s Planning and Saving Tool
Forget, for a moment, the complexity of planning and saving for a comfortable retirement. Use this print form Ballpark E$timate®
worksheet to get an initial fix. Want a more “sophisticated” number? Go online at www.choosetosave.org and use the interactive
version with more assumptions that you can change. By simplifying some issues, such as projected Social Security benefits and
earnings assumptions on savings, the print version of Ballpark offers users a way to obtain a rough first estimate of what Americans
need for retirement. The worksheet assumes you’ll realize a constant real rate of return of 3% and that wages will grow at the same rate
as inflation; however, it does provide the user an opportunity to take into account longevity risk.
For example, let’s say Jane is a 35-year-old woman with two children, earning $30,000 per year. Jane has determined that she will
need 70% of her current annual income to maintain her standard of living in retirement. Seventy percent of Jane’s current annual
income ($30,000) is $21,000 (Question 1). Jane would then subtract the income she expects to receive from Social Security ($12,000 in
her case) from $21,000, equaling $9,000 (Question 2). This is how much Jane needs to make up for each retirement year.
Jane expects to retire at age 65 and if she is willing to assume that her life expectancy will be equal to the average female at that age
(86), she would multiply $9,000 by 15.77 for a result of $141,930 (Question 3). Since Jane does not expect to retire before age 65, she
does not answer Question 4. Jane has already saved $2,000 in her 401(k) plan. She plans to retire in 30 years so she multiplies
$2,000 x 2.4 equaling $4,800 (Question 5). She subtracts that from her total, making her projected total savings needed at retirement
$137,130. Jane then multiplies $137,130 x .020 = $2,742 (Question 6). This is the amount Jane will need to save in the current year for
her retirement (it is assumed the annual contribution will increase with inflation in future years).
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