$2,000
Number of years until retirement
35
Projected value factor
x 10.6766
Value of current savings at retirement
$21,353
U.S. Department of Labor Employee Benefits Security Administration 37
SAVINGS FITNESS A GUIDE TO YOUR MONEY AND YOUR FINANCIAL FUTURE
Step 4 pulls the prior calculations together so you can see where you are today and how much to save each year as a percentage of your current salary. This percentage is also called your “target saving rate.”
Saving this amount each year will help you reach your retirement goals.
Start by entering the number of years until you plan to retire from Step 1 on line 1. Next, enter the estimated savings needed at retirement from Step 2. From Step 3, write down the value of your current savings at retirement on line 3. Subtract line 3 from line 2 and enter it on line 4 – this is the additional retirement savings you need.
Enter your current annual salary on line 5. Multiply it by the projected saving rate factor (in the box below the Step 4 worksheet) that corresponds to the number of years until you plan to retire and enter it on line 7. This is the maximum amount you would have if you saved your entire salary between now and retirement including inflation and investment earnings, or the maximum possible savings based on salary until retirement. Saving this much is not something you would normally do. This number is only used to help figure out how much of your salary to save. Divide line 4 by line 7. This is your target saving rate, or the percentage of your salary to save.
The target rate includes any contributions your employer makes to a retirement savings plan for you, such as an employer matching contribution. If, for example, you are in a 401(k) plan in which you contribute 4
percent of your salary and your employer also contributes 4 percent, your saving rate would be 8 percent of your salary.
Remember that the worksheet only gives you a rough idea, a savings goal. Some may face higher expenses in retirement because of personal circumstances and choose to save more. Some may have other sources of income in retirement such as a traditional defined benefit pension or money from selling a home that would lower the target rate.
You can compare your results with what you are currently saving after you complete Worksheet 5. If you are currently saving less, don’t be discouraged. The important thing is to start saving, even a small amount, and increase that amount when you can. Come back and update this worksheet from time to time to reflect changes and track your progress.
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