Retirement Planning for Non-Experts: How to Calculate What You Need and Build a Plan That Works

Retirement planning feels overwhelming because it involves large numbers, long timeframes, and uncertainty about the future. Most people either ignore it entirely or make vague plans like "save more" without understanding what "more" actually means. The truth is, retirement planning doesn't require a finance degree—it requires understanding a few key concepts and using the right tools to make projections. This guide breaks down retirement planning into digestible steps, explains the math in plain language, accounts for inflation and healthcare costs, and shows you how to use retirement calculators to build a plan that actually works for your situation. You'll learn not just how much to save, but how to save it, where to put it, and how to adjust your plan as life changes.

The Retirement Planning Reality Check

Most Americans are behind on retirement savings. According to the Federal Reserve's 2023 Survey of Consumer Finances, the median retirement account balance for households aged 55-64 is only $134,000—far below what's needed for a comfortable retirement. The good news: starting early and being consistent can overcome even a late start. The bad news: waiting makes it exponentially harder.

The difference between starting at 25 vs. 35 is dramatic. Someone who saves $300/month starting at 25 has $1.2 million at 65 (assuming 7% returns). Someone who starts at 35 needs to save $600/month to reach the same goal. Time is your greatest asset—or your biggest enemy if you waste it.

Step 1: Estimate Your Retirement Expenses

Your retirement expenses will likely be different from your current expenses. Some costs decrease (work-related expenses, commuting, professional clothing), while others increase (healthcare, travel, hobbies). A common estimate is 70-80% of pre-retirement income, but this varies widely based on your plans.

Building Your Retirement Budget

Create a detailed retirement budget:

Be realistic but not overly conservative. Many retirees spend more in early retirement (travel, hobbies) and less later. Plan for both phases.

Step 2: Account for Inflation: The Silent Wealth Eroder

Inflation is retirement planning's hidden enemy. If you need $60,000 today, you'll need much more in the future. At 3% annual inflation (historical average):

That $60,000 becomes $145,636 in 30 years. This is why retirement numbers seem so large—inflation compounds over decades. Our retirement calculator automatically accounts for inflation in its projections.

Step 3: The 25x Rule: Your Retirement Target

The 25x rule states you need 25 times your annual retirement expenses saved. This assumes a 4% withdrawal rate, which historically has been sustainable over 30 years. Here's the math:

This is a starting point. Use our retirement calculator for personalized projections based on your specific situation, expected returns, and time horizon.

Step 4: Calculate Your Income Sources

Your retirement income comes from multiple sources. Understanding each helps you determine how much you need to save:

Social Security

Check your Social Security statement for estimated benefits. Full retirement age is 67 for those born 1960 or later. Claiming early (62) reduces benefits by 30%. Delaying until 70 increases benefits by 24% plus cost-of-living adjustments. Our Social Security calculator helps you optimize your claiming strategy.

401(k) and Employer Plans

If you have a 401(k), project its growth. Use our 401(k) calculator to see how employer matching and contributions grow over time. Employer match is free money—maximize it.

IRAs (Traditional and Roth)

Traditional IRAs provide tax deductions now but taxable withdrawals later. Roth IRAs use after-tax money but provide tax-free withdrawals. Our IRA calculator and Roth IRA calculator help you compare strategies and see which works better for your tax situation.

Pensions

If you have a pension, include the estimated monthly benefit. Pensions are becoming rare but are valuable if you have one.

Step 5: Find the Gap and Calculate Savings Needed

Subtract your expected income from your estimated expenses to find the gap you need to fill:

This gap calculation shows you don't need to save for 100% of expenses—just the portion not covered by other income sources.

Step 6: Determine Monthly Savings Required

Once you know your target, calculate how much to save monthly. Our retirement calculator does this automatically, but here's the framework:

• Enter your current savings
• Enter your target amount (from Step 5)
• Enter years until retirement
• Enter expected return rate (7-8% for diversified portfolio)
• Calculator shows required monthly contribution

If the required amount seems impossible, adjust: work longer, save more aggressively, or plan for a more modest retirement lifestyle.

Healthcare Costs: The Wild Card

Healthcare is one of the largest retirement expenses and hardest to predict. Fidelity estimates a 65-year-old couple will need $315,000 for healthcare in retirement (not including long-term care). This doesn't mean you need $315,000 in cash—it means you need to account for healthcare in your retirement budget.

• Medicare Part B: ~$175/month per person (2024)
• Medicare Supplement (Medigap): $150-300/month per person
• Medicare Part D (prescriptions): $30-100/month per person
• Out-of-pocket costs: Deductibles, copays, non-covered services
• Long-term care: $50,000-100,000/year if needed (consider insurance)

Budget $500-800/month per couple for healthcare premiums and out-of-pocket costs, plus emergency reserves for unexpected medical expenses.

Building Your Retirement Plan: A Step-by-Step Framework

Year 1: Assessment and Foundation

• Calculate your retirement expense estimate
• Check Social Security statement for benefits
• Assess current retirement account balances
• Determine your gap (expenses - income sources)
• Use retirement calculator to see required savings rate
• Maximize employer 401(k) match immediately

Years 2-5: Acceleration

• Increase 401(k) contributions annually (aim for 15% of income)
• Open and fund Roth IRA (up to $7,000/year limit)
• Automate all retirement contributions
• Review and rebalance portfolio annually
• Track progress toward your target

Years 6-10: Optimization

• Maximize all tax-advantaged accounts (401(k), IRA limits)
• Consider catch-up contributions if over 50
• Diversify investments appropriately for age
• Update retirement projections as income/life changes
• Plan for major expenses (kids' education, home purchase)

Using Retirement Calculators Effectively

Our suite of retirement calculators helps you plan comprehensively:

• Retirement Calculator: Overall planning, see if you're on track, calculate required savings
• 401(k) Calculator: See how employer matching accelerates growth
• IRA Calculator: Compare Traditional vs. Roth strategies
• Roth IRA Calculator: Understand tax-free growth benefits
• Social Security Calculator: Optimize claiming age strategy

Run scenarios with different assumptions (retirement age, savings rate, return rates) to understand how variables affect your plan.

Common Retirement Planning Mistakes

• Underestimating expenses: Healthcare and long-term care are expensive
• Ignoring inflation: $1 million today won't buy the same in 30 years
• Starting too late: Every year of delay requires much larger contributions
• Being too conservative: Need growth to outpace inflation (some stocks necessary)
• Not maximizing employer match: Leaving free money on the table
• Forgetting about taxes: Understand tax implications of withdrawals
• Not accounting for healthcare: Medicare doesn't cover everything
• Assuming Social Security will be enough: It's designed to replace only 40% of pre-retirement income

Real-World Example: Building a Retirement Plan

Sarah, age 35, wants to retire at 65. Current situation:

Using our retirement calculator, Sarah discovers she needs to save $650/month to reach $750,000 in 30 years (assuming 7% returns). She currently contributes 6% to 401(k) ($375/month) plus gets $188 employer match. She needs to increase her contribution to 10% ($625/month) to be on track. She sets this up automatically and reviews annually.

Conclusion: Your Retirement Plan Starts Today

Retirement planning doesn't require perfection—it requires starting and being consistent. Use the 25x rule as a starting point, but run detailed calculations using our retirement calculators to get personalized projections. Account for inflation, healthcare, and all income sources. Then automate your savings and review annually.

Remember: the most important step is the first one. Start saving today, even if it's a small amount. Time and compound interest are powerful allies when you start early. Every year you delay makes the goal harder to reach. Your future self will thank you for the plan you build and execute today.

References: Bengen, W. P. (1994). "Determining Withdrawal Rates Using Historical Data." Journal of Financial Planning. Fidelity Investments. (2024). "Retirement Savings Guidelines." Federal Reserve System. (2023). "Survey of Consumer Finances."