The Math Behind Retirement: How to Save, Budget, and Plan for Retirement

what does it take to retire? Blog by EFC wealth management and cory chapman

Knowing how much you need to save, how to budget, and what mistakes to avoid can be a lot to juggle as you try to prepare for a successful retirement. In this article, we break down the most important things you need to think about as you create a financial plan for the best years of your life.

An easy retirement is something that everyone looks forward to, but the math behind retirement can make it a little tricky.

1. Start budgeting

To start with your retirement plan, you need to keep track of what you expect your expenses to be, plus keep in mind the additional costs of unexpected emergencies – as well as spur-of-the-moment fun.

Begin by figuring out your expenses. Fixed expenses include insurance, car and mortgage payments, other loans, and any expenses you have where the number doesn’t change. Variable expenses include food, clothing, gas, etc. – expenses you have every month but where the number changes frequently. Keeping track of this and figuring out what your average monthly expenses are is a great place to begin in retirement planning, as you can add to this what you expect to have saved for unexpected expenses and prepare for a comfortable retirement.

2. Know your number

How much do you want saved? What do you need to save for? To start out in retirement planning, you need to have a savings goal. This goal needs to encompass everything, including emergencies. Many adults forget to factor in continued expenses, such as payments on their mortgage or other loans, which can really cut into your retirement savings if you aren’t careful.

If you’ve put together a budget plan but aren’t sure how to factor in the unexpected costs of emergencies or sudden expenses, there’s a really easy rule of thumb to work by. If you are thirty years old, you will want to have one year of your salary in some form of savings. So, if you make 50k/year, you’ll want 50k saved somewhere. If you’re forty, then you want three times your annual salary saved, and so forth. The full savings rate is as follows:

(multiple of salary) 30: 1x 40: 3x 50: 6x 60: 8x 67: 10x

3. Set goals

Now that you’ve got your number, you need to start thinking about what you need to do to reach it. Are you on track with your goal? Do you have enough saved based on the multiples of salary chart?

Start by breaking down your goal into annual or even monthly targets. Let’s say you plan to retire in 20 years and you’re $500,000 away from your retirement goal. At this rate, you’ll want to have saved $25,000 each year, or $2083.33 each month.

Obviously, the numbers will change based on when you plan to retire and what you have left to save for retirement. Plus, the math can get tricky when you factor in pensions, social security, 401(k) payments, etc. If you’re unsure of the math, let EFC Wealth Management help you – we’re dedicated to improving the community by providing financial planning resources and opportunities to people like you.


Securities and Advisory Services offered through Madison Avenue Securities, LLC, member FINRA/SIPC. Insurance services offered through EFC Wealth Group. EFC Wealth Group and EFC Wealth Management are not affiliated with Madison Avenue Securities, LLC. Cory’s CA License 0B92957, Firm CA License #0H87076

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