35
Current annual salary
$50,000
Projected salary growth factor
x 2.8139
Value of annual salary at retirement
$140,695
Replacement rate
x .40
Income goal for the first year of retirement
$56,278
U.S. Department of Labor Employee Benefits Security Administration 35
SAVINGS FITNESS A GUIDE TO YOUR MONEY AND YOUR FINANCIAL FUTURE
Step 2 takes the result from Step 1, the income you need for the first year of retirement, and estimates how much you will need to last through retirement. In retirement, while your investments will continue to grow, the cost of retirement likely will go up every year due to inflation – that is, today’s dollars will buy less each year because the cost of living usually rises. Step 2 estimates how much savings you will need, taking into account the growth of your investments and inflation through your retirement. People are living longer on average which means you could need retirement income for 30 years or more. Planning to live well into your 90s can help you have a secure retirement and avoid outliving your income.
Enter the result from Step 1 on the first line. Then enter the number of years you think you will spend in retirement. Select a projected income factor from the box under the Step 2 worksheet that corresponds most closely to the number of years you expect to live in retirement and enter it on line 3. Multiply line 1
by line 3 and enter the result on line 4. This is the estimated value of savings you need at retirement to last through retirement.