Although many people realize the importance of retirement savings, figuring out how much money to put aside to meet your retirement goals can still present a challenge. Getting that answer means planning ahead — and asking a lot of questions.

To jumpstart that process, it can be helpful to think about what you want out of retirement. By weighing common factors that may impact your personal needs, you can take critical first steps toward making your dreams a reality.

Let’s take a brief look at what you need to think about to help reach your retirement goals — no matter your current life stage.

How much do you need to save for retirement?

The answer? Well, like so many important life questions, it’s complicated.

You may have heard it said that you need at least 70–90% of your income to maintain your current standard of living in retirement. However, depending on your own situation and the type of retirement you hope to experience, that percentage may vary.

By determining your personal income replacement ratio — or how much money you’ll need to set aside to maintain your current standard of living — you may be better positioned to make informed investment and savings choices to help you meet your long-term goals.

Yet planning for retirement isn’t only about determining how much money you need to set aside. There are other factors to keep in mind as you age, and many of them can influence how much you would need to save for future expenses that may come along.

What about Social Security Retirement benefits?

Many people believe that they can rely on their future Social Security Retirement benefits only to discover that the monthly benefits fall short of covering all expenses.

It may be helpful to recognize early in your working life that Social Security only replaces a portion of an average wage earner’s income — and that may not be as much as you expect. The Social Security Administration (SSA) website includes a calculator¹ where you can estimate how much you’ll earn in benefits based on when you retire and if you retire between the ages of 62 and 70.

When contemplating the future, there are some big questions to tackle related to how your benefits might impact your retirement income, such as:

• At what age do you plan to retire?
• Do you plan to bow out of work as soon as you’re eligible for Social Security Retirement benefits — or even earlier?
• Or will you want to stick around a few years to help increase your Social Security Retirement benefits eligibility, retiring at your full retirement age or later?

The answers to these questions are important, and they can impact your savings goal. After all, the earlier you retire, the less money you may receive from the Social Security Administration. And that may mean you’ll need to save more money to last throughout your lifetime.

Something else to keep in mind: Social Security Retirement benefits may fail to keep up with inflation and may cover only a portion of your expenses. So, additional savings may be needed.

Four additional factors to consider when setting a retirement savings goal

There are other things that may impact how much savings you’ll need to address the challenges and opportunities your golden years may bring.

1. Retirement age and life expectancy

When calculating how much you need to save, it’s helpful to factor in the number of years you expect to spend in retirement. According to the U.S. Department of Labor (DOL), the current average for most American retirees is approximately 20 years.²

Yet life events can reshape even the best-laid plans. You may not be able to work for as many years as you’d like. A chronic illness or disability could force you to retire earlier than you plan — and thus increase your need to rely on retirement savings.

Although you can't know how long your life may be, there are things that may give you some clues. Review your family history — how long your relatives have lived, health issues that are common in your family — as well as your own health. These details can help identify how long you may live.

Also consider that average human life spans are increasing. The longer you live, the more resources you’ll need to support your standard of living.

2. Health care needs

Health care costs rise yearly, sometimes faster than general inflation, and fewer employers are offering health benefits to retirees.

Even with insurance in place, health care costs could eat into your savings and prove financially challenging if the need for care is especially long, complicated or expensive.

Long-term care is also an important consideration. That may be time spent in a rehabilitation facility after an injury or illness, memory care in a nursing home or at-home care. Although Medicare can sometimes help with some of those costs, it may not cover your needs.

3. Lifestyle, travel and entertainment

Looking forward to traveling, spending time at the lake or hitting the golf course? You probably have ideas about what you want to enjoy in retirement. Sketching out what you’d like to do can help determine how much cash you’ll need on hand.

Here are some questions to consider:

• Do you want to travel? Where, how often and for how long? Will you be traveling alone, with a partner or with family and friends?
• Will you focus on fitness and maintain membership at a gym or club?
• Are there any hobbies or activities you would like to pursue? What will you need to buy to enjoy those hobbies? Are there membership or access fees you’ll need to pay?
• Do you want to continue working part-time? Are you thinking about starting a new career or business?
• Are you planning to be involved in charity efforts, volunteering your time or donating money to support a cause? Would you like to give money to a charity that’s important to you or leave them money from your estate?

Answering these questions can help you decide what additional costs your ideal retirement might require.

4. Inflation

Even if you were able to account for every possibility when planning for your retirement, economic challenges can still impact you. Much like Social Security Retirement benefits mentioned earlier, the costs of day-to-day retirement living — including food, clothing and housing — can be affected by inflation.

In fact, inflation could lower the value of your savings from year to year, significantly reducing your purchasing power over time. It’s important for your savings to keep pace with or exceed inflation, which has been on the rise.

The takeaway

Thinking through the above factors and your goals can help determine how much you need to save for retirement. With these insights, you can develop a strategy and then possibly make a smoother transition to retirement.

Understandably, formulating a savings goal can seem like a challenge when tackling it alone. But RBFCU Investments Group can help you chart a path to saving more for retirement. Our financial advisors can help you not only create a retirement savings goal that addresses the situations that can pop up as you age, but also they can help you formulate a strategy tailored to your retirement dreams.