Are You Saving Enough for Retirement?

Retirement Account Calculator

Still with us? You're almost there! Now let's figure out about how much you'll have in your retirement accounts to see how close you are to having what you'll need.

Line 12 : List the average annual interest rate for your IRAs, 401(k), and any other retirement accounts combined: %_____________

Line 13 : Multiply line 12 by the dollar amount you save annually: $_____________

Line 14 : Multiply line 13 by the number of years until you retire (line 3) to determine the approximate value of your account(s) at retirement: $_____________

Line 15 : Enter your life expectancy at retirement (you can find this from tables listed at www.irs.gov or www.irahelp.com): _____________ years

Line 16 : Divide line 14 by line 15 to figure out the amount you'll be able to withdraw each year: $ _____________

Note : We haven't factored in compounding here. Your investments will compound within your retirement account as long as they are appreciating. We're showing you how to make simple, conservative estimates, which, given the ups and downs of the market, will put you on safer ground than making calculations that assume your investments will do well every year.

How'd You Do?

So, how does the amount you'll be able to withdraw each year (line 14) match up with the amount you'll need (line 9)? If you're close – or even have a surplus – congratulations! You're doing great.

If the result depresses you, don't worry! There are steps you can take to pick up the pace. We talk more about them in other articles ( see Catch Up On Your Retirement, the Dolan Retirement Plan, and Five Retirement Myths), but we'll give you the first and most important one right now.

Dolan Smart Money Move : If you're in debt, get out of debt! The natural inclination is to try to find investments that will give you a big return on your money. But in a sense, you will realize the biggest returns if you pay off your debts and stop paying out high credit card interest rates.

Invest as much as you can – even an extra $50 a month makes a big difference – toward your credit card bills. Start with whatever card has the highest interest rate first and pay off all debt that does not provide a tax deduction. Once you've done that, start investing extra – again, even $50 is great – toward your mortgage principal each month. Before you know it, your debts will be a bad memory!

Better yet, once you've paid off your debts, you may find that you need a whole lot less money to live a comfortable life—which could mean that your dreams of an early retirement could become a reality.