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How To Tell If Your Retirement Is In Jeopardy

Published September 16, 2021

7 minute read

David Ning

By David Ning

One of the most common financial concerns for adults these days is retirement. It comes up over and over again. For anyone concerned about money, retirement is a very big problem to confront. Current (and future) generations of working-aged Americans aren’t exactly fairing well, when it comes to retirement savings. Some studies have shown that Millennials are going to need to try even harder to save for retirement, in order to stay on schedule. And with the cost of living (rent and housing, especially) skyrocketing, there’s just not enough money to go around. If you have some retirement worries of your own, here’s how to evaluation whether you need to make some serious changes.

You Need to Save a Ton To Retire Comfortably

According to CNBC, Millennials will need to save nearly half their income over the next 30 years just to retire. I know this sounds like an exaggeration, but let’s dig deeper. The suggestion is coming from Olivia S. Mitchell, a respected professor of insurance/risk management, business economics, and public policy. She’s also the executive director of Wharton’s Pension Research Council at the University of Pennsylvania. It’s not some nobody who’s just throwing around ridiculous numbers to get clicks.

That’s a lot. How can you possibly save 50% of every dollar you earn for three decades? Especially when rent alone is already taking up most of the other 50%?  Let that sink in for a second. How can that math possibly work?

Is your retirement in jeopardy? It’s a really good question to ask yourself — whether you are a millennial or a baby boomer. Here’s what you need to do in order to know you are safe when it’s time to stop working.

Run the Numbers

You will never really know whether you’re retirement is safe (or not) unless you take the time to run the numbers. I know, the math can seem complicated. But there’s really no getting around that. Run. The. Numbers. Please.

I recently watched a Netflix series called Lost in Space. In one episode, the scientists were trying to get out of a jam. They needed to make the space station rotate enough to generate enough rotational energy, but not too much it started completely spinning out of control. It seemed impossible at first. When the plan ultimately worked, the captain of the ship said “We got lucky.” The main character then retorted “No, we did the math.”

If you want to have know whether your retirement plans will work or not, don’t leave it to luck. Do the math!

How Much Will You Need To Spend?

Once you decide you are ready to tackle the big question, then it’s time to figure out your retirement lifestyle. Where do you want to live? What are you going to do? Financial advisors like to throw around rough estimates, like needing 80% of your pre-retirement salary to live on. However, those are merely rough guesses (at best).

The more you picture your desired lifestyle, the more accurately you can estimate how much you’ll need (or want) to spend in retirement. Factor in housing costs (are you still renting or is your mortgage paid off?), transportation, utilities, food, and health insurance (which is often more expensive as you age).

Calculating How Much You Need to Save

Once you have a desired spending figure, it’s time to work backwards. Use that number and calculate how much you’ll need to save for retirement.  A general rule is the 4% withdrawal rule. It came from a study that found that a portfolio with 50% bonds and 50% stocks has historically had a 100% chance of the money lasting for 30 years, if you only withdraw 4% from the portfolio per year. (You can still increase the withdrawal by inflation each year.)

This means that if you need, for example, $40,000 a year from your portfolio, you need to save roughly $1 million dollars first. Does your math show that you’ll need $80,000 per year to survive in retirement? Then you’ll need $2 million. The first step is always to figure out what your savings goal should be.

Older Asian couple worried about money


OMG That’s A Lot!

It’s true. That $2 million definitely sounds like a ton of money (because it is). It’s even worse if you listen to the doomsayers who claim that the safe withdrawal rate is more like 2.5% instead of 4%. If you use their recommendation, $2 million is no longer enough. Your new goal is more like $3.2 million.

The good news is that the vast majority of people retire with way less than that. They are all generally fine. For one, the 4% rule covers the worst-case scenario in history. The average retiree could probably have withdrawn more than 4% and still be okay.

Don’t Forget About Social Security

You should remember that Social Security will pick up some of the slack. The average monthly Social Security check is $1,430.73. For a family with two wage earners, that’s $34,337.52 per year that you can pretty much bet on. And that’s before you touch your own savings or investment portfolios.

That average includes everybody, even those who worked for far fewer years than a full career. For those who are retiring after a full career, the Social Security check is likely much higher. Go to to check out your estimated benefits. You may be pleasantly surprised. And make sure to avoid these Social Security mistakes to maximize your benefits.

Putting All the Numbers Together

Let’s say you do need $80,000 per year in retirement. You figured that your Social Security will provide half of that. That means that you’ll still need $40,000 more per year (or $1 million total) when you retire.

With that in mind, it’s time to start saving and let compound interest work its magic. Obviously, the longer you have, the less you’ll need to save. Assuming an 8% real return (inflation adjusted return) and starting from scratch, you need to save about $1,698 a month if you have 20 years until retirement. If you have 30 years, then you only need to save roughly $671 given the same return. We can’t stress this enough: the sooner you start to save — even if it’s only a little bit of money at first — the better off you’ll be in the long run.

Will Your Student Loans Ruin Your Retirement Prospects?

What about student loans? Should you be worried that your student loans will derail retirement? After all, student loan payments are expected to take a good chunk of money out of your pockets for years to come after graduation.

Think about it for a second. Millennials will lose about $100,000 for their retirement accounts simply due to their average student debt load of $25,000, once you factor in compound interest. By the time the debt is repaid (with interest) — plus the money your investments could have earned — it all adds up to a very costly expense.

However, this doesn’t necessarily mean your retirement prospects are completely ruined by your student load debt. Here are two things to consider when you do your calculations.

Are You Setting Money Aside?

Even if you are repaying student loans, the reality is that you might still be earning a return. If you’re setting money aside for retirement, even as you make student loan payments, you are still receiving the advantages associated with compound returns. Small savings and small growth are still better than none at all.

How fast you pay of your student loans should be based on your overall returns. If your student loan interest is fairly low and your annual returns from your investments higher, there isn’t a lot of reason to stop investing just to pay down your student debt a little faster. Do what is right for your own personal situation.

Did Your Education Result in Higher Pay?

Another consideration is whether or not your education has resulted in higher income. Were you able to develop the skills and expertise to receive higher pay? If so, that college debt was probably worth it in the long run. Yes, even when those student loan payments seem like they’ll never end.

While it’s always better to gain an education without going into debt, it’s not an option for everyone. The reality is that you can often boost your earning power significantly by properly leveraging a student loan into a new degree, certification, or skillset. That earning power can probably overcome the fact that you’re missing out on $100,000 of retirement savings while you’re younger. What’s $100,000 if you can use your degree to get a higher annual income that allows you save $2 million by the time you retire?

Middle-aged couple looking at retirement savings


Continue Earning Income After Retirement

Keep in mind that many of these studies, while interesting, make one key assumption. They presume that everyone will work until they hit a certain age, and then never earn income again. The reality is that many people still earn a modest living while retired.

Many retired folks are able to make money on the side, especially with the help of the internet. It’s possible to create passive income sources and everyone has access to the stock market. We’re not saying you should keep grinding in a cubical for 40 hours a week. Instead, find a part-time job somewhere that appeals to you — maybe a golf course or a garden center, for example.

The reality is that many people are now taking the time to travel and gain worldly experiences while they are still young, rather than waiting until they are retired. At that rate, who cares if you have to get a part-time job in your 70s? You’ve already enjoyed life to its fullest long before you hit your golden years. It’s still a life well spent.

The Bottom Line

What do you think? Will you have to work forever? Or do you have plans to live your life a little differently than the work-until-you-retire model?

Take stock of your current finances and future plans. Check to see if your retirement is in jeopardy. For some of you, this might be a wakeup call to get your butt in gear and start saving. For others, it’s time to think of an alternative. Whatever you decide though, the last thing you want is to do nothing at all. That’s guaranteed to fail.

David Ning

Experienced Finance Writer

David is a published author, entrepreneur and a proud dad. He firmly believes that anyone can build a solid financial foundation as long as they are willing to learn. He runs, where he discusses every day money issues to encourage the masses to think about their finances more often.

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