Only 52 percent of Americans expressed confidence that they will be comfortable in retirement, according to a March 2012 survey conducted by the Employee Benefit Research Institute.¹ Chances are people know they’re not putting enough aside or they simply have no idea how much they will need to continue the life they lead and the one they want for the future.

How much do you really need to retire?

According to the report, 56% of Americans haven’t even performed a retirement needs calculation. Most people haven’t even taken the time to figure out how much they will need to retire. If you haven’t actually sat down and done the math (preferably with the help of a retirement calculator), chances are that you aren’t saving enough for your retirement.

How much you will need depends on what you plan to do in retirement, including the expenses that you will have. You can figure out a target number for your nest egg (like $1 million) and hope it’s enough, but you can also get a little more specific and estimate how much money you will need each month or each year to meet your retirement needs.

Take into account your expected obligations. If you plan properly, you can be out of debt, with your mortgage (if you have one) pretty much paid off, by the time you retire. This is the ideal situation. Estimate how much you will spend each month on housing, food, insurance, and other activities, like hobbies or travel. Then, use that number to estimate how big your nest egg will need to be (or how much passive/investment income you will need to generate each month to meet your needs).

Once you know what you will need as the end result, it’s time to figure out what you need to set aside each month to reach your goals.

Can you trust market returns to do what you want?

As you plug numbers into the retirement calculator, trying to determine how much more you should be setting aside each month, it’s important to consider whether or not you can trust market returns to do what you want/expect.

Betterment’s advice tools can help you understand the impact of different decisions, as well as how to get back on track to your goal. You can also explore different scenarios like “what if I increased my monthly deposit by $1,000?” to see how that will change your projected investments.

It always comes back to savings

Despite our constant speculation over market movements—in the end —one of the biggest predictors of whether or not you will have enough for retirement is how much you save. It’s that simple! Even if you never get around to doing your own calculations on how much you should save for retirement, at least do this: always save 20% of your income and invest it in a broadly diversified mix of stocks and bonds appropriate for your time horizon.

Recognize the reality: You probably aren’t saving enough for retirement and look for ways to boost your retirement account contributions.

You’ll be in a much better place when you retire.


More from Betterment:

New to Betterment? Betterment is the largest, fastest-growing automated investing service, helping people to better manage, protect, and grow their wealth through smarter technology. With more than 50,000 customers and $1 billion in assets under management, the service offers a globally diversified portfolio of ETFs, designed to help provide you with the best possible expected returns for retirement planning, building wealth, and other savings goals. Betterment is a CNBC Disruptor 50 and Webby award winner and has been featured in the New York Times, Forbes, and the Wall Street Journal. Betterment helps people to achieve a smarter financial future with minimal effort and at a fraction of the cost of traditional financial services. Learn more here. 

Determination of largest automated investment service reflects Betterment LLC’s distinction of having the most accounts, based on Betterment’s review of account numbers self-reported in the SEC’s Form ADV, across Betterment’s survey of RIA automated investment services. Determination of fastest-growing automated investment service reflects Betterment LLC’s distinction of obtaining the largest number of new accounts since January 1, 2014, based on Betterment’s review of account numbers self-reported in the SEC’s Form ADV, across Betterment’s survey of automated investing services.

This article was published on December 20, 2012

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