Among the mass market website tools and booklets focused on retirement planning, you should try T. Rowe Price’s Retirement Income Calculator. It walks you through the calculations needed to figure how much you should be saving to reach your retirement goal.
Age of retirement: Plug in your preferred age of retirement, within reason, of course. There’s no point plugging in a dream number like “I’d like to retire by age 45, but I know the only way I can do that is to win the lottery!” Depending on how the analysis works out, you can always go back and plug in a different age. Sometimes folks are pleasantly surprised that their combined accumulated resources provide them with a decent enough standard of living that they can consider retiring sooner than they thought.
Include Social Security?: T. Rowe’s calculator asks if you want to include expected Social Security benefits. We’d rather that they didn’t pose this question at all, because you definitely should include your Social Security benefits in the calculations. Don’t buy into the nonsense that the Social Security program will vaporize and you’ll get little to nothing from it. For the vast majority of people, Social Security benefits are an important component of their retirement income, so do include it.
Based upon your current income, T. Rowe’s program will automatically plug in your estimated benefits. So long as your income hasn’t changed or won’t change dramatically, using the calculator’s estimated number should be fine. Alternatively, you can visit the Social Security website to get your latest estimate.
Rowe’s analysis allows to you make adjustments such as your desired age of retirement, rate of savings, and to what age you’d like your savings to last. So, for example, if the analysis shows that you have much more than enough to retire by age 65, try plugging in, say, age 62, and voilà, the calculator quickly shows you how the numbers change.