While saving for retirement can sometimes be a challenge, calculating what you need to save can be done in less than 60 seconds!  Start the clock and let’s go.

STEP 1:  Write down your current monthly gross income.

STEP 2:  Subtract expenses that will not exist when you retire.*

STEP 3:  Subtract monthly income amounts that will be received from social security**, pensions, and any other recurring streams of income that you’ll receive when you retire that you are not currently receiving.

STEP 4:  Add expenses that will increase when you retire.  (Examples include additional travel expenses, golfing costs***, and especially any increase in cost of health care such as long-term care expenses, Medicare, and Medigap insurance.****)

STEP 5:  After subtracting and adding, multiply your result times 240.*****

STEP 6:  Subtract current retirement account balances such as IRAs and 401Ks and other liquid assets in non-qualified accounts such as CDs, mutual funds, and net value of investment properties.******

STEP 7:  Divide the result by the number of years until you want to retire.  This is how much you need to save each year.*******


You’ve done it!  If you had all of the numbers you needed at your immediate disposal, this calculation can be accomplished in 60 seconds and provides a realistic picture of how much you need to save each year.  The Choice Insurance Agency is here to help you.  PLAN.  ACHIEVE.  PROTECT.



Need a little more clarification?  Here is the small print and additional information for the steps above:

* Examples include 401 K contributions, your current mortgage payment if it will be paid off, any other loan payments if they’ll be paid off, costs of commuting and cost of lunches at work.  Obviously, you can deduct your monthly amount you are investing for retirement each month as you will begin drawing on your accounts instead of investing.  The calculations get a little trickier if you have loan payments that won’t be paid off immediately at retirement, but soon after.  If that’s the case, still subtract the monthly expense and then ADD the principal balances in STEP 6.  Give some thought to expenses that will go away in retirement such as eating out lunch at work.  These expenses can add up.  Consider that $8 per day for lunch plus $4 per day for coffee equals $60 per week, or over $250 per month!  You’ll probably spend less in clothes since you will no longer need a “work wardrobe”!

** You may learn what Social Security will provide by creating an account at ssa.gov and retrieving your most recent statement.  To forecast what Social Security will provide you in the future, and what your various options are, ask a Financial Adviser at The Choice Insurance Agency for your custom Social Security report.

***If you are planning to spend more money on certain things in retirement, it’s important to calculate them in the equation so that you don’t come up short, or disappointed in your retirement options.

****Proper planning for changing health care costs can be one of the most difficult challenges since it’s relatively uncharted personal territory.  One of the services we offer at The Choice Insurance Agency is a custom health care cost analysis based on your age, health, and  health care options that are available to you.  Just ask, it’s a complimentary service.

*****Why 240?  The number calculated thus far is your monthly income need.  To obtain a needed capitalization amount, we multiply by 12 and then divide by 5% to calculate what the capitalization amount required if we are to earn and live on 5% of our assets, without utilizing our capital.  Caution, this is a simplistic calculation!  (the goal is to calculate in sixty seconds).  This calculation does not factor in inflation or consuming principal balances or annuitization options.  To be more conservative, a 4% return would require multiplying by 300.  A 3% return would require multiplying by 400.  For more complex illustrations which factor in inflation and/or consuming principal balances and/or annuitization, talk with a Financial Adviser at The Choice Insurance Agency.  We can run an entire projection and illustration for you.

******Gather all of your statements and add up the balances.  Only subtract net real estate values if you did NOT include the net rental income in STEP 1.  In this 60 second calculation, we’ll count real estate as an asset or an income but not both.  If you did not count net rental income (after taxes, insurance, maintenance, and management) in STEP 1 then calculate net rental property values in STEP 6 as the value of the property X 90% MINUS cost of repairs to sell MINUS any outstanding mortgage balance.

*******Again, this is a simplistic calculation and does not take into consideration inflation or investment returns.



The Choice Insurance Agency is the only Nationwide Insurance and Financial Agency in Hampton Roads that is owned and led by a Certified Financial Planner.  Our goal is to assist clients in planning, achieving, and protecting their life goals.  For assistance in any of these steps, submit a contact request.

The Choice Insurance Agency serves and protects thousands of households and small businesses throughout Virginia Beach, Norfolk, Chesapeake, Hampton, Newport News, Portsmouth, Suffolk and surrounding areas.  For your convenience, we have two offices on the Southside in Virginia Beach and one office on the Peninsula in Hampton.



The Choice Insurance Agency’s mission is to help you get from where you are to where you want to be financially by planning, achieving your plan and protecting your plan from unexpected events.  In the process, our goal is to deliver insurance services in a manner that exceeds your expectations.  See what The Choice Insurance Agency can do for you today. Give us a call at 757-416-5100 to speak with one of the licensed, professional members of our team or request a contact here. The Choice Insurance Agency. We’re on YOUR side. 757-416-5100.