Are You on Track for Retirement? How to Calculate Your Retirement Readiness

Over half of American households report having no dedicated retirement savings. Among those who do save, the median 401(k) balance is roughly $87,000. The average tells a more optimistic story at around $146,000 (Fidelity data), but averages get pulled up by high balances at the top.

If you are reading this, you are probably in the group that is saving something. The question is whether that something is enough.

How Much Do You Actually Need?

The standard rule of thumb is to replace 70% to 80% of your pre-retirement income to maintain your lifestyle. But that is a rough guide. A better approach is to estimate your actual annual expenses in retirement and subtract guaranteed income sources like Social Security and pensions.

A common framework is the 25x rule: multiply your expected annual retirement expenses (minus guaranteed income) by 25. That gives you a target portfolio size that should last 30+ years using the 4% withdrawal rule.

For example, if you need $50,000 per year from your portfolio (after Social Security), your target is $1,250,000.

Our Retirement Calculator runs this calculation with your specific inputs, including expected Social Security benefits, pension income, and investment returns.

2026 Contribution Limits: Use Every Dollar You Can

The IRS raised contribution limits across the board for 2026. If you have not updated your payroll deductions since last year, you are leaving tax-advantaged space on the table.

Account Type	2026 Limit	2025 Limit	Change
401(k) / 403(b) / 457(b)	$24,500	$23,500	+$1,000
IRA (Traditional or Roth)	$7,500	$7,000	+$500
SIMPLE IRA / 401(k)	$17,000	$16,500	+$500
Catch-up (Age 50+)	$8,000	$7,500	+$500
Super Catch-up (Ages 60 to 63)	$11,250	--	SECURE 2.0
Total 401(k) + Employer	$72,000	$70,000	+$2,000

For someone under 50 maxing out both a 401(k) and a Roth IRA, the total tax-advantaged contribution space in 2026 is $32,000 per year. If you are 50 or older, that jumps to $40,000. And if you are in the 60 to 63 age range, you can shelter up to $43,250 annually.

SECURE 2.0 Changes to Watch in 2026

Two provisions matter this year:

Mandatory Roth catch-up for high earners: Starting January 1, 2026, if you earned $150,000 or more in FICA-taxable wages the prior year, all catch-up contributions to your 401(k) must go into a Roth account. This means after-tax dollars. No more pre-tax catch-up if you are a high earner. If your employer's plan does not offer a Roth option, you lose access to catch-up contributions entirely.

Super catch-up for ages 60 to 63: If you are between 60 and 63, your catch-up contribution limit increases to $11,250 (the greater of $10,000 or 150% of the standard catch-up). This is a use-it-or-lose-it window. Once you turn 64, the standard $8,000 catch-up resumes.

How to Check If You Are on Track

Step 1: Estimate Your Target

Use the 25x rule or our Retirement Calculator to estimate how much you need. Be realistic about expenses. Healthcare costs in retirement average $6,500 to $7,500 per year per person for a 65-year-old couple, according to Fidelity's 2025 estimate.

Step 2: Project Your Current Trajectory

Take your current balance, your annual contribution, and an assumed real return (7% is standard for a diversified equity portfolio). The compound interest formula gives you your projected balance at retirement age.

Our 401K Calculator handles this with employer match, salary growth, and return assumptions built in.

Step 3: Compare and Adjust

If your projected balance falls short of your target, you have three levers: contribute more, work longer, or adjust your retirement lifestyle expectations.

Real-World Scenarios

Rachel: 35, Starting to Get Serious

Rachel is 35, earns $85,000, and has $28,000 in her 401(k). She contributes 6% and gets a 4% employer match. Her total annual contribution is $8,500 (10% of salary).

At a 7% real return, her projected balance at age 65 is approximately $980,000. If she needs $40,000 per year from her portfolio (after Social Security), her target is $1,000,000. She is close but slightly short.

If she increases her contribution to 10% (plus 4% match = 14% of salary), her projected balance jumps to approximately $1,250,000. That clears the target with room to spare. She should also consider maxing out a Roth IRA using our Roth IRA Calculator to add tax-free income in retirement.

Michael: 52, Behind and Worried

Michael is 52, earns $110,000, and has $95,000 saved. He has been contributing 5% with a 3% match. He needs to catch up fast.

At his current rate, his projected balance at 65 is approximately $410,000. He needs $750,000. The gap is $340,000.

Michael can use the age 50+ catch-up to contribute $32,500 per year to his 401(k). If he maxes it out and maintains a 7% real return, his projected balance at 65 jumps to approximately $680,000. Still short, but much closer. He should also max out an IRA ($7,500 plus $1,000 catch-up = $8,500) using our IRA Calculator, which brings his projected total to approximately $760,000. That clears the target.

Linda: 61, Using the Super Catch-Up

Linda is 61, earns $130,000, and has $420,000 saved. She plans to work until 67. Thanks to the SECURE 2.0 super catch-up, she can contribute $24,500 + $11,250 = $35,750 per year to her 401(k).

At a 6% real return (slightly more conservative given her shorter horizon), her projected balance at 67 is approximately $820,000. Combined with Social Security (approximately $2,800/month at full retirement age), she is in solid shape. She should verify her Social Security estimate with our Social Security Calculator.

Common Mistakes

1. Not getting the full employer match. A 2023 Vanguard study found that approximately 30% of employees leave free money on the table by not contributing enough to get their full employer match. That is a guaranteed 50% to 100% return on your contribution. Nothing else in investing comes close.

2. Being too conservative with investments. If you are 30 years from retirement, a 100% bond portfolio virtually guarantees you will not reach your target. At age 30, an 80% to 90% equity allocation is appropriate. At 50, 60% to 70% equity is standard. At 60, 40% to 50% equity is typical.

3. Forgetting about RMDs. Required Minimum Distributions begin at age 73 for traditional 401(k) and IRA accounts. Failing to take them results in a 25% penalty on the shortfall. Our RMD Calculator can help you plan.

4. Ignoring tax diversification. Having all your savings in traditional (pre-tax) accounts means every dollar withdrawn is taxed as ordinary income. Adding Roth contributions gives you tax-free withdrawal options, which is valuable for managing your tax bracket in retirement.

External Research and Resources

• IRS 2026 Retirement Contribution Limits (Notice 2025-67) is the official source for all 2026 contribution limits, catch-up provisions, and income phase-out ranges.
• Vanguard How America Saves 2025 Report provides data on 401(k) participation, contribution rates, and account balances across millions of participants.
• Social Security Administration Retirement Estimator gives you a personalized estimate of your future Social Security benefits based on your actual earnings record.

People Also Ask

How much should I have saved for retirement by age 40?

A common benchmark is 2x to 3x your annual salary by age 40. If you earn $75,000, aim for $150,000 to $225,000. This assumes you plan to retire at 65 and maintain a similar lifestyle.

What is the maximum I can contribute to my 401(k) in 2026?

The 2026 employee contribution limit is $24,500. If you are 50 or older, you can add an $8,000 catch-up for a total of $32,500. If you are 60 to 63, the super catch-up raises your total to $35,750.

Should I contribute to a Roth or traditional 401(k)?

If your current marginal tax rate is higher than your expected retirement tax rate, contribute to traditional (pre-tax). If you expect your retirement tax rate to be higher, or you want tax diversification, contribute to Roth. Many people benefit from splitting contributions between both.

When do I have to start taking required minimum distributions?

RMDs begin at age 73 for traditional 401(k) and traditional IRA accounts. Roth IRAs do not have RMDs during your lifetime. Roth 401(k)s eliminated their RMD requirement starting in 2024 under SECURE 2.0.

Related Calculators

• Retirement Calculator - Estimate your retirement savings and income needs
• 401K Calculator - Project your 401(k) balance at retirement
• Roth IRA Calculator - Project Roth IRA growth and tax-free income
• IRA Calculator - Project traditional IRA balance and income
• Social Security Calculator - Estimate your Social Security benefits
• Pension Calculator - Calculate defined benefit pension income
• RMD Calculator - Calculate required minimum distributions
• Annuity Calculator - Calculate the future value of an annuity