Keep the Money Flowing Throughout Retirement
You know that saving for retirement is important, but do you have a solid plan in place? One that will provide you with the income you need to live the lifestyle you envision in retirement? How can you plan so that you can make that vision a reality?
Determine How Much You Will Need to Accumulate
Whether you are just beginning to save or are well underway, start by thinking about your retirement in terms of your income needs. When it comes to your retirement savings, the accumulation of, for example, $300,000 is not meaningful unless you can translate that figure into a projected yearly or monthly income stream.
The Retirement Income Calculator
The Retirement Income Calculator1, available through Prudential's Online Retirement Center, can help you:
- understand how much money you'll need in retirement;
- learn if you're on track to enjoy a comfortable retirement; and
- obtain a personalized report with an action plan so you can make immediate changes to your strategy.
The Calculator retains all of the data you enter and links it directly to your Prudential Retirement®
account information, so you can use it anytime, without having to reenter your data.
Estimate Your Health Care Expenses
Some of your expenses in retirement may decrease, but others—such as health care—will most likely increase. Why? Improvements in health care mean that many people are now living longer. So you may need more retirement income than you think. In fact, men who are 55 years old today will need savings of $109,000 to $354,000 to retire in 2020— just to cover health care expenses. Women that age will need $147,000 to $406,000 in savings because they tend to live longer.2
To learn more about:
Understand Where Your Money Will Come From
Once you have identified your retirement income needs, it's time to take a look at your expected sources of retirement income, which may include:
- Social Security
- Workplace-based retirement plans (traditional pension plans and 401(k), 403(b), 457, and/or profit sharing plans)
- Personal savings and investments (including IRAs and savings accounts)
If you will be eligible to collect Social Security, keep in mind that it will replace only about 41% of pre-retirement income for the average worker.3 And when it comes to your Social Security benefit, consider all of your options. The age at which you start taking your Social Security benefits can make a big difference in your monthly income. Visit the Social Security website and click on "Estimate Your Retirement Benefits" to access the Social Security Estimator. This tool can help you project your future monthly Social Security benefit, based on your date of birth, earnings history, and the age at which you begin receiving benefits.
Workplace-based Retirement Plans
Defined Contribution Plans
The ending balance of your defined contribution (DC) retirement plan (such as a 401(k), 403(b), profit sharing, or 457 plan) will depend on how much has been contributed to your account and how well your investments have performed. You determine how you will draw money from this account in retirement.
Typically paid for by the plan sponsor, a pension plan generally provides a guaranteed benefit, based on the plan's guidelines—which stipulate how much retirement income you will receive if you qualify. Benefits are usually based on your years of service and earnings. (This type of employer-sponsored plan is becoming much less common than DC plans.)
Personal Savings and Investments
You may also have a variety of savings accounts, traditional and/or Roth IRAs (Individual Retirement Accounts), stocks, bonds, mutual funds, and other types of investments that can help you supplement your retirement income.
To learn more about IRAs, visit:
According to a Gallup poll, 22% of Americans expect to work part-time in retirement—up from 10% in 2001.4 Income from ongoing employment may help you close any gaps in your retirement income stream.
When trying to project your future retirement income, remember to consider how your money will be taxed when taken out.
- For retirement plans such as 401(k)s, 403(b)s, 457 plans, and pensions, since the money goes into your account on a before-tax basis, all contributions and earnings are taxed upon withdrawal. The same is true for traditional IRAs. Keep in mind that state tax laws vary.
- With a Roth IRA, or Roth contributions to your workplace-sponsored retirement plan, if you're over age 59˝ and have had your account for at least five tax years, all distributions are free from federal income tax, although state income taxes may apply.
- Tax issues related to stocks, bonds, and mutual funds can be complicated; you may want to consult a broker or professional tax advisor for help.
To learn more about taxes in retirement, visit:
Make Your Money Last
When developing your planning strategies, be sure to learn about the different products that are available to help you make your money last in retirement. Be sure to consider your withdrawal (distribution) options so you can create a retirement income strategy that will best suit your personal needs.
To learn more about making your money last in retirement, visit:
Get the Help You Need
To learn more about building a retirement income plan, click on the “Retirement” bar at the top of your screen and take advantage of the many tools and resources available throughout this site.
Need personal assistance with determining what makes the most sense for your situation and how to make it happen? Contact your investment professional or a Prudential Retirement Counselor at 1-877-PRU-2100. A Prudential Retirement Counselor can assist you Monday through Friday, from 8 a.m. to 6 p.m., ET.
1 The Retirement Income Calculator is hypothetical and for illustrative purposes only and is not intended to represent performance of any specific investment, which may fluctuate. There is no assurance that retirement income objectives will be met. It is possible to lose money by investing in securities.
2 Source, Employee Benefit Research Institute, 12/2010
3 Caldera, Selena; "Social Security: Ten Facts That Matter;" Fact Sheet 154; AARP Public Policy Institute; April 2009
4 Brandon, Emily; “Planning to Retire: 10 Sources of Retirement Income;” U.S. News and World Report; April 20, 2009