Most retirement planning starts with a savings target. A better first step is a retirement budget: what you expect to spend each month once the paycheck stops. The savings target follows from that number.
1. Start from today's spending, line by line
Take your current monthly budget and go through each category. Some costs usually fall (commuting, work clothes, retirement contributions, possibly a paid-off mortgage). Others often rise (healthcare, travel, hobbies, home maintenance).
2. Add the costs that are easy to forget
Health insurance and out-of-pocket medical costs, replacing a car every so often, home repairs, helping family, and gifts. Annual costs divided by 12 belong in the monthly number.
3. Subtract guaranteed income
State or government pension, any workplace pension or annuity. What's left is the gap your savings need to cover.
4. Turn the gap into a rough savings target
A common rule of thumb is the 4% guideline: annual gap x 25. A $20,000 yearly gap points to roughly $500,000. It's a starting point for a conversation, not a guarantee; returns, inflation, taxes and how long retirement lasts all change the answer.
5. Re-check every year
Update the budget once a year. The closer you get, the more accurate the estimate becomes.
Free tools
- Free retirement budget spreadsheet (CSV for Excel / Google Sheets)
- Retirement savings calculator
- Retirement withdrawal calculator
- FIRE calculator
- 2027 Annual Budget Planner ($10.99, a full year of monthly budgets in one file)
- 42 free budget templates, pay what you want ($0 is fine)
General information, not personal financial advice.