Find your Personal Retirement Number
What do you want to do when you retire? Many people hope to travel, spend more time with their families or enjoy their favorite activities, or just relax with no work or money worries. Help your retirement dreams come true years from now by making smart saving decisions today.
Follow these steps to figure out how much you will need to save for retirement:
- Expect a long life. A 65-year-old man today has a 17-year life expectancy. A 65 year-old-woman has an average life expectancy of more than 19 years. That means half of today's 65-year-olds will live past 82 (men) or 84 (women). Your retirement savings need to be large enough to potentially support you for a very long time.
- Anticipate high out-of-pocket medical costs. At age 65 you are eligible for Medicare, but the government program does not cover all your expenses. The Employee Benefits Research Institute (EBRI) estimates that a 65-year-old couple in 2019 that does not have any employer-provided health benefits will need about $450,000 to have a 50% chance of funding health care expenses not covered by Medicare. Even with employer benefits, there is a 50% chance that out-of-pocket expenses will reach $268,000.
- Calculate your Personal Retirement Number. Answer six simple questions and the retirement calculator will show you your Personal Retirement Number, an estimate of how much money you will need to generate the income you want in retirement.
- Don't assume your income needs will go down in retirement. If you are still 20 or 30 years from retirement, it can be difficult to come up with a detailed budget for what your income needs will be in retirement. The retirement calculator assumes that you may want to replace about 85% of your estimated pre-retirement income before taxes. However, your own retirement needs may differ. To change your percentage of pre-retirement income you would like to replace, click on the “advanced settings” feature on the results page. The costs of traveling, putting your children through college, or medical bills may boost your income needs substantially. To ensure a comfortable retirement, you should maximize your retirement savings.
- Prepare yourself. Many Americans have a retirement savings shortfall. According to the EBRI, about 64% of all workers have less than $50,000 saved up for retirement. If your Personal Retirement Number shows you aren't on track to meet your goals, use that as motivation to start saving more.
- Revise your retirement savings goals. The calculator allows you to adjust your monthly savings to see how that will affect your ability to reach your retirement goal. Find out what would happen if you boosted your savings to 10-15% of your pre-tax income. Another great retirement savings strategy is to aim to have your big debts paid off before you retire. After all, if you don't have a mortgage or loan to repay, your monthly expenses in retirement will be a lot lower than they are today.
What's next? Get started on saving for retirement
Brokerage IRAs (non-FDIC insured) are available through Merrill Edge. Bank IRAs (FDIC insured) are available through Bank of America, N.A.
Merrill Edge is the marketing name for two businesses: Merrill Edge Advisory Center, which offers team-based advice and guidance brokerage services; and a self-directed online investing platform. Both are made available through Merrill Lynch, Pierce, Fenner & Smith Incorporated (MLPF&S).
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