Ask yourself these questions now, and you won't run out of money later. 

By Kate Rockwood
Updated February 01, 2018
Road made of money
Credit: Corey Olsen

Pop Quiz: Are you on track for retirement? If your response is closer to head-scratching than head-nodding, we feel you. Research shows that most people (81 percent!) don’t have a handle on how much they’ll need to save for their later years. Yet there’s a pervasive sense of not having enough socked away: Less than a sixth of workers feel financially prepared for a 20-year retirement, according to a 2017 Merill Lynch report.

But here’s the thing about figuring out the dollars and cents of swapping your paycheck for unlimited free time: Ignorance isn’t bliss. “The real danger in avoiding this topic is that you’ll come up short with your savings and have to work longer or miss out on the retirement you want,” says Andrea Coombes, a retirement specialist with NerdWallet. A retirement check-in can ensure you’re on the right financial path—and give you peace of mind to boot. These are the questions you need to ask yourself right now.

How Much Do I Really Need?

You may have heard that you should aim to save enough money to replace 80 percent of your income in retirement. “But that general rule of thumb has little to do with the individual,” says Matt Fellowes, founder of the retirement-planning firm United Income. For a personalized target, run your numbers through an online calculator. (We’re fans of the ones Bankrate, AARP, and the Financial Industry Regulatory Authority provide.) You’ll be asked targeted questions for a clearer estimate, such as “How long do you expect to work?” “Do you think you’ll get raises most years?” and “What will your lifestyle look like in retirement?” Notes Coombes, “The calculators vary in their assumptions—like how long you’ll live or what market returns might be—so it’s not a bad idea to compare two or three tools.”

Am I Maximizing Free Money?

Needing $500,000 for retirement isn’t the same as needing to put half a million bucks in the bank. Even if you have zero dollars set aside at age 35, if you start saving $500 a month and earn 6 percent in interest or investment returns, compounded monthly, you’ll have about $502,000 by age 65—with $322,000 coming from interest. Matching contributions from your employer could help you build your savings even faster. According to a 2017 Vanguard study, about 20 percent of people don’t participate in their employer-offered 401(k) plan. “The ideal is to save 15 percent of pretax income for retirement, and employer matches count toward that target,” says Amy Godwin, a certified financial planner and vice president at Fidelity Investments. “Saving enough to get the full match is an easy way to bump your percentage without shrinking your paycheck.”

Am I on Track?

If you stuffed your savings under a mattress, you could divide your goal amount by the number of years between you and retirement and call it a day. But we’re talking about investing here, which means there’s no linear line—and it’s harder to gauge at a glance how your current savings stack up. (Will the $50,000 you have today let you fete your friends when you hit 65, or are you facing a shortfall?) Even one meeting with a fee-only financial planner can help you determine your status. One savings option is to break your goal amount into milestones, says Godwin. Aim to have two times your salary saved by the time you hit 35, three times by 40, four times by 45, and six times by 60. If you aren’t meeting these mini goals, consider it a push to boost your savings if possible.