Are You on Track to Retire? Start With Spending, Not Salary

By the SterlingCat editorial team. Last reviewed August 2026.

A rule of thumb like "ten times your salary" cannot know what retirement will cost you. A retirement-readiness analysis asks the direct question instead: will your saving produce the balance your planned spending needs, after other income, through your planning age? Under stated assumptions, that question has an answer.

That is still a scenario, not a forecast. Investment returns, inflation, spending, retirement income, and lifespan are uncertain. But putting them in one calculation shows which assumption is deciding the result and what change would close a modeled gap.

One scenario, both sides of the comparison

Take an illustrative example, not a real person. At age 40, the person has $150,000 saved and contributes $1,000 a month. The plan is to retire at 67, spend $50,000 a year in today's dollars, receive $20,000 a year from sources outside the modeled portfolio, and fund spending through age 95.

The return assumptions are visible: 5% a year before retirement and 4% after it, both before inflation, with 2.5% inflation. They are inputs chosen to demonstrate the calculation, not predictions.

Start with the annual spending gap, in today's dollars

The Department of Labor frames retirement saving around this gap: income need less Social Security and other retirement income. Enter only an outside-income estimate you have obtained independently.

The two balances answer different questions

The projected balance grows today's $150,000 and the monthly contributions to age 67. The modeled balance needed is the value at retirement of the annual portfolio-funded spending through age 95, priced in what the return earns over inflation. In this scenario the plan falls short by $123,093: the projected balance covers 91% of the modeled need. Three levers close a gap like that: contribute more, about $183 a month here, retire later, or revisit the assumptions themselves.

Projected balance versus modeled balance needed at retirement

This scenario projects $1,230,950 against $1,354,042 needed: a $123,093 shortfall, with 91% of the modeled need covered. An additional $183 a month closes that modeled gap if every assumption holds.

Time changes both sides

Retiring later adds contribution years and shortens the period the portfolio must fund. Retiring earlier does the reverse. With every other input held fixed, moving this example from age 67 to 65 widens the shortfall; moving it to 70 produces a surplus.

Modeled surplus or shortfall at three retirement ages

The planning age stays 95. This is not advice to work longer; it shows how strongly the selected retirement age affects this scenario.

Return assumptions can overwhelm the answer

A constant-return calculation makes sensitivity easy to see, but it does not make any return likely. Below, the first number is the annual return before retirement and the second the annual return after it, both before inflation. Inflation stays at 2.5%.

Required monthly contribution under three return pairs

Against a current contribution of $1,000 a month, the same plan demands $2,859 if returns run low and $159 if they run high. None of the three pairs is a forecast; the spread between them is the reason to test more than one set of assumptions.

What this result cannot say

It is not a probability of success. The model follows one constant return before retirement and one after it. It does not generate a distribution of market outcomes.
It omits the order of returns. The Society of Actuaries calls this sequencing risk: withdrawals interacting with the order of returns, not only their overall level. A poor early sequence can deplete a retirement account faster than the constant path suggests.
The planning age is not a life-expectancy forecast. It is the final age through which this scenario funds spending. Living longer than planned creates longevity risk.
It omits taxes, fees, and account rules. It also holds contributions, spending, and other income to the entered pattern. Real plans change.

The Department of Labor says no retirement-income rule of thumb fits everyone. Treat the result as a structured question: which input deserves verification, and which controllable input would improve the plan?

Run your retirement scenario

The retirement-readiness calculator compares your projected balance with the modeled balance needed and shows the contribution gap. Run it three times, with low, middle, and high returns. From there:

Compound interest to isolate the saving phase.
Targeted savings for a fixed amount and date.
What to fund first to place retirement contributions among other priorities.
Funding-priority guide for the broader sequence.

How this is sourced

The retirement-income gap and planning-horizon guidance come from the U.S. Department of Labor. The risk limitations come from the Society of Actuaries Research Institute. The worked example and charts are original calculations from the same deterministic model as the linked calculator; every assumption is stated above.

Sources

Grounded in authoritative primary sources:

This is educational, not personalized financial advice. For your specific situation, talk to a licensed professional.