How to know if your retirement is on track?

The “right amount” you need to have saved for retirement is often uncertain. Here is how to know if your retirement is on track.

3 min read

Most Americans have doubts about how much they need to save for retirement. Typically, retirees fund their retirement through retirement savings, pensions, and social security. If you plan to maintain your lifestyle in retirement, you must figure out if your retirement is on track.

You can know if your retirement is on track by looking at your savings income ratio. For example, a 50-year-old worker earning $80,000 annually would be on track if he has saved six times the current salary i.e. $480,000. You can also use the 4% rule to know how much you need to save. For example, if you will need to withdraw $40,000 yearly (4%), it means you will need to have $1 million in savings.

Retirement Savings Benchmarks

Savings Income Ratio

An important factor that affects how much you need to have in your nest egg is your savings income ratio. You can use this ratio to know how much you need to have saved at a given age based on multiples of your income.

Fidelity has calculated savings factors to help workers achieve the ideal amount of savings. Here are age-based milestones that Fidelity recommends:

By 30: Save 1x your salary

By 35: Save 2x your salary

By 40: Save 3x your salary

By 45: Save 4x your salary

By 50: Save 6x your salary

By 55: Save 7x your salary

By 60: Save 8x your salary

By 67: Save 10x your salary

For example, if your current annual salary is $50,000, and you are age 60, Fidelity estimates that you should have saved eight times your annual salary, or $400,000.

If you want to get an adjusted savings factor based on your age, expected retirement age, and lifestyle in retirement, use Fidelity’s Savings Widget to know how much you should have saved at each age.

Replacement Ratio

The replacement ratio is the percentage of your pre-retirement income that you will need to maintain your current lifestyle in retirement. Most studies suggest saving 70% to 80% of pre-retirement annual income. This means that, if you earn $60,000 annually, and you plan to replace 80% of your annual income, you will need $48,000 in annual retirement income.

Once you know how much you will need in retirement income yearly, you can estimate how much you need to save based on when you plan to retire and your life expectancy. For example, using Social Security’s Life Expectancy calculator, a female worker born in 1962 and expects to retire at age 70 can live 18 more years after retirement. If her replacement ratio is 80% i.e. $48,000, it means she will need to save $864,000 to maintain her lifestyle.

When using the replacement ratio method to track your retirement, you should first calculate your annual consumption, taxes, and healthcare costs. The replacement ratio will be the sum of your total annual costs expressed as a percentage of your pre-retirement income. Variables that may affect the desired replacement ratio may include marital status, income level, health status, homeownership, and retirement income streams.

4% withdrawal Rate

The 4% rule is a withdrawal rule that retirees can use to know how much to withdraw each year. This guideline assumes that you can withdraw 4% from your retirement money annually so that the retirement savings can last around 30 years. The 4% rule seeks to establish a steady income stream that will maintain a retiree's lifestyle.

You can also use the 4% rule to calculate your desired retirement savings. For example, if you need $40,000 each year in retirement, it means you will need about $1 million in savings ($40,000/0.04). Similarly, if you need $80,000 each year in retirement, it means you will need about $2 million in savings ($80,000/0.04). The 4% rule allows retirees to adjust the dollar withdrawals to account for inflation.

Consider other sources of retirement income

When you retire, you will likely have multiple sources of income including social security, pension, and distributions from retirement accounts. Knowing which sources are available to you and estimating how much each stream will provide can affect how much you need to save today.

Here are the various sources of retirement income that will be available to you:

Social Security

If you are eligible for social security, you can start collecting benefits from age 62. As of 2022, the average social security benefit is $1,657 per month, and a person who retires at full age can collect up to $3,345.

For example, if your estimated monthly benefit from social security is $2,500, it means there is $30,000 annually that your retirement savings will not need to cover.

You can estimate how much you will receive from Social security using the benefits calculators on the Social Security website. If you have my social security account, you can estimate the retirement benefits you will receive and see the effects of different age scenarios.

Employer pension

If you are eligible for a traditional defined-benefit pension from your employer, it means that your employer will provide you with a steady monthly income stream. The amount of pension you qualify to receive may vary depending on the age when you retire and the distribution option you choose.

Your employer can help you estimate the pension you will receive. Ask your employer’s benefits department if you qualify, the pension requirements, and how much income you qualify to receive.

If you are a federal employee and you are covered under the FERS plan, you will receive benefits from a basic benefits plan, social security, and Thrift Savings Plan.

Retirement account income

Retirement plans like 401(k) and IRA could provide substantial retirement income when you retire. If you have a traditional 401(k) or IRA, you can start taking penalty-free withdrawals from age 59 ½ to fund your retirement. If other retirement incomes are enough to meet your needs in retirement, you can delay making withdrawals until age 72, when you must start taking the required minimum distributions.


An annuity is a type of investment offered by insurance companies. You can purchase an annuity by making periodic or lump sum payments. Once you retire, you will receive regular distributions from the insurance company.