Americans may be optimistic people by nature, but when it comes to retirement, many of us have our doubts.

In the 2021 Retirement Confidence Survey from the Employee Benefit Research Institute, only 30% of respondents said they were very confident of having enough money for a comfortable retirement. Another 40% were somewhat confident. 

That leaves almost a third of Americans, or roughly 30%, who doubt they’re on track to retire successfully. And unfortunately, they may be right.

The pandemic has had an impact on confidence, but not across the board. Over half of workers and two-thirds of retirees surveyed as part of the Retirement Confidence Survey said the pandemic has not changed their confidence in reaching a secure retirement. But more than one-third of workers and one-fourth of retirees say the pandemic has made them somewhat or significantly less confident that they are on track for a comfortable retirement. The rest of the group falls somewhere in the middle.

Key Takeaways

  • For many Americans, retirement planning is becoming a pressing issue.
  • Determining your expected expenses in retirement is an essential first step.
  • While most people have one source of income, retirees can have several: Social Security, investments, pensions, and retirement plans.
  • If your projected expenses are greater than your projected income in retirement, it might be time to take decisive steps like spending less now and adding more to retirement savings.

To determine whether you’re on track, it helps to know where you want to go. What kind of retirement lifestyle do you envision for yourself? What’s that likely to cost? And, the make-or-break question: Will you have the money to pay for it? Here’s how to get some answers.

1. Estimate Your Expenses

Generations ago, people assumed their expenses would automatically decline in retirement. More recent experience shows that isn’t always the case. Some expenses should go down, especially work-related ones like commuting—but others, such as vacations and dining out, may go up.

If you plan to downsize to a smaller home, you might save some money on housing. If you intend to upsize or do major remodeling, though, your housing costs could be higher.

So, starting with your current expenses as a guide, try to create a ballpark budget for retirement. Some experts even suggest living on that budget for a while before you retire to see how realistic it is.

“We study cash flow, taxes, and retirement plan contributions to establish a lifestyle amount," says Nick Vail, co-owner and financial advisor at Integrity Wealth Advisors in Granger, IN. "This represents what you are currently living on now."

Vail adds the following:

The majority of people are not living on 80% to 90% of their income, as many companies will suggest you’ll need in retirement. Many are closer to 65% to 70% when you take into consideration mortgage payments, taxes, and what they are currently deferring into retirement plans. We use the lifestyle amount as a baseline when projecting retirement income needed.

2. Add Up Your Income

During your working years, you’ve probably had one basic source of income: a salary. In retirement, however, you’ll most likely have multiple sources, including Social Security, a traditional employer pension (if you’re lucky enough to have one), investments, and earnings from any work you do. Try to estimate each of those, then tote them all up. The following are some tips:

Social Security

You can get a projection of your future benefits at the Social Security website, using the Retirement Estimator or other calculators on the website that help you estimate important elements, such as life expectancy.

“I encourage everyone, and I mean everyone, to create an account on to see their exact benefits," says Marguerita Cheng, CFP®, CEO of Blue Ocean Global Wealth in Gaithersburg, MD. "In fact, I do it right with my clients. If the client has a spouse or partner, I have them both do it.”

Employer Pensions

If you have a traditional, defined-benefit pension coming from an employer, you should receive periodic estimates of your benefits. However, your benefit could vary depending on when you retire and the form in which you elect to take the money (lump sum vs. annuity, single-life vs. joint-life payout, etc.). Your plan administrator should be able to estimate your likely pension income under the scenario of your choice. Test out several possible scenarios to see which is best. 

Investment Income

Your investment and retirement accounts, such as 401(k) plans and IRAs, could provide a substantial portion of your monthly income in retirement, especially if you lack a traditional pension. After age 72, you’ll generally have no choice but to withdraw a certain amount each year from the retirement accounts, in the form of required minimum distributions.

For the purposes of this exercise, figure that every year during retirement you can withdraw 4% of your total principal, plus a small annual increase for inflation, without exhausting your savings. The 4% rule, as this is called, is the subject of some controversy in the financial planning community, but it’s still a reasonable place to start. 

Earnings From Work

Many Americans say they plan to keep working in “retirement,” either part-time or full-time. That doesn’t always work out, however, so it’s best not to count on any income you aren’t absolutely sure of. 

3. Do the Math

If your projected income exceeds your projected expenses, you’re on track, at least for now. Something could still come along and derail you—a job loss, a market plunge—but so far, so good.

If you discover a shortfall, however, all is not lost. For example, could you:

  • Scale back your spending now and in retirement?
  • Plan to retire a little later?
  • Save more aggressively between now and then?

Any of those steps, or some combination of them, could help put you squarely back on track.

The Bottom Line

The only way to know whether you’re on track to a comfortable retirement is to run the numbers. Make a best-guess estimate of your retirement expenses, add up all your likely income sources, and compare the two. If the result isn’t what you hoped for, you might need to adjust your plans.

According to Mark Hebner, founder, and president of Index Fund Advisors, Inc., in Irvine, CA, and author of Index Funds: The 12-Step Recovery Program for Active Investors:

Depending on how close you are to retirement, you can either start saving more or you’re going to have to slowly start adjusting your standard of living. It doesn’t have to be dramatic, but you may want to get to a point where you are comfortable with the standard of living that you can afford.