Are You on Track for Retirement?

It means the money you will have when you stop working can cover the gap between your spending and your guaranteed income, at a withdrawal rate that has held up through bad markets in the past. The calculation has three steps.

1. Estimate spending, including taxes. Start from what you actually spend now, not from your salary. Drop the costs that end with work (commuting, payroll tax, retirement contributions, the mortgage if it will be paid off) and add the ones that begin: health insurance, Medicare premiums, travel, help for adult children or grandchildren.
2. Subtract guaranteed income. Social Security for both spouses at the ages you expect to claim, any pension, and any annuity income. Use your statement at ssa.gov rather than a guess.
3. Divide the remaining gap by a withdrawal rate. Morningstar's latest research puts the safe starting rate at 3.9% for a 30-year retirement with fixed, inflation-adjusted spending and a portfolio of 30% to 50% stocks (Morningstar). Dividing by 3.9% is the same as multiplying the gap by about 25.6.

Then add what the formula leaves out: years of full spending before Social Security starts, health insurance before Medicare at 65, and a reserve for large one-time costs such as a roof, a car, or help with a grandchild's tuition. Our guide to how much you need to retire goes through each of these in detail.

As a first screen, yes; beyond that, not much. The best known set is Fidelity's: savings of six times your salary by 50, eight times by 60 and ten times by 67 (Fidelity). Fidelity assumes you save at least 15% of income a year, retire at 67, keep your lifestyle, and that savings replace about 45% of pre-retirement income, with Social Security covering the rest.

The multiples go wrong in predictable ways for the households we write for:

• A pension changes the answer. A retired teacher or federal employee with a large inflation-adjusted pension may need far less in savings than the multiple suggests.
• High earners get a smaller share from Social Security. Benefits are capped, so Social Security replaces a much smaller share of a $300,000 salary than of a $100,000 one. The savings must do more.
• Spending, not salary, is the target. A couple who has lived on 60% of income for decades, with the difference going to savings, needs far less than a couple spending everything they earn.
• Retiring before 67 raises the bar. Each year earlier adds a year of withdrawals and removes a year of saving.

For the fuller age-by-age picture, including medians from the Federal Reserve, see how much you should have saved by age.

By a great deal. At a 3.9% withdrawal rate, every $1,000 a month of income that rises with inflation and lasts for life replaces about $308,000 of savings. A couple with $5,000 a month of combined Social Security has, in effect, about $1.5 million of inflation-protected income that no salary multiple counts.

When you claim sets the size of that income. For anyone born in 1960 or later, full retirement age is 67. Claiming at 62 cuts the benefit by 30%, and each year you wait past full retirement age adds 8% until 70 (SSA). A $3,000 benefit at 67 is therefore $2,100 at 62 and $3,720 at 70, before cost-of-living adjustments. For a married couple, the higher earner's claiming age also sets the survivor's benefit for the rest of the widow or widower's life. Our guide to when to claim Social Security covers the break-even ages and spousal rules.

Pensions need two adjustments before you count them. First, check for a cost-of-living adjustment. A fixed $40,000 pension loses about a quarter of its buying power over ten years at 3% inflation, so it supports less spending in your 80s than it does at 65. Second, check the survivor option. A single-life pension that stops at the retiree's death leaves the survivor short. If you are offered a lump sum instead, our pension lump sum versus annuity guide shows how to compare them.

Here it is for a hypothetical couple. David and Ellen are both 61. David is a senior engineer; Ellen recently left her job and is covered by David's employer plan. Their house is paid off. They spend $120,000 a year including taxes, and David plans to retire at 64. Their Social Security statements show $62,000 a year combined if both claim at 67. Neither has a pension. They have $1,450,000 saved: $1.1 million in 401(k)s and IRAs and $350,000 in a brokerage account.

Now the projection. David can contribute $35,750 to his 401(k) in 2026 using the larger catch-up for ages 60 to 63, and his employer adds about $12,000. At a 4% return after inflation for three years, their $1,450,000 grows to about $1,780,000 by the time he retires at 64.

That is about $71,000 above the target. So they are on track, but with little margin. A bear market in the year David retires, or spending that proves $10,000 higher than planned, would erase it. They have three ways to widen the margin without changing how they live: David works to 65, which adds a year of saving and removes a year of bridge; the higher earner delays his claim to 70; or they agree now which spending they would cut after a bad year. Any one of them turns a thin margin into a comfortable one.

David and Ellen are not real people. The figures are illustrative, in today's dollars, and ignore state taxes. Run your own numbers in our retirement calculator.

Taxes, health care, long-term care and timing. A household can clear the target and still run into trouble on any of these.

Start with the steps that have the largest effect: save more through catch-up contributions, work a little longer, delay Social Security, and build flexibility into spending. Change investments last. Adding risk late in a career is how a small shortfall becomes a large one.

1. Use every catch-up contribution

The tax code lets people 50 and older put away considerably more. The 2026 limits (IRS):

Two details matter for higher earners. If your prior-year FICA wages from the employer exceeded $150,000, your catch-up contributions must go in as Roth, so they no longer reduce this year's taxable income. And HSA contributions stop once you enroll in Medicare; see the HSA guide. A couple both 50 or older who max out two 401(k)s and two IRAs can save $82,200 a year, enough to close a meaningful gap in five years. Our 401(k) guide covers the mechanics.

2. Work two or three years longer

Each extra year of work helps in three ways at once: another year of contributions, another year of growth, and one fewer year the portfolio must pay for. For a household spending $120,000 a year and saving $50,000, one more year of work is often worth $150,000 or more to the plan. Part-time or consulting work helps too; even $40,000 a year of earnings covers a large share of spending in the early years. If you claim Social Security before full retirement age while working, SSA withholds $1 for every $2 you earn above $24,480 in 2026. The limit no longer applies once you reach full retirement age (SSA).

3. Delay Social Security, especially the higher earner

Waiting from 67 to 70 raises the benefit by 24%, for life, with inflation adjustments. Living on savings from 67 to 70 draws the portfolio down faster at first, but the larger check means much smaller withdrawals for the rest of retirement. Longevity is the risk this protects against best. The 8% a year is guaranteed, and no bond you can buy offers that with inflation protection. It is usually the best deal on the table for the higher earner in a married couple.

4. Build flexibility into spending

The 3.9% rate assumes you never cut spending, even after a crash. If you would trim travel and gifts by 10% after a bad year, you can start with a higher withdrawal rate. Morningstar's research shows flexible approaches such as guardrails support higher starting withdrawals than fixed spending. Split your budget into essentials and discretionary items. Aim to cover the essentials with Social Security, pensions and any annuity income, so a bad market affects only the discretionary part.

5. Count the house, carefully

Home equity is a reserve, not income. Downsizing in your 70s, or keeping the house as a long-term-care fund, can make a thin plan workable. Do not count on it for everyday spending. Our downsizing guide shows what a move typically frees up after costs.