When it comes to retirement readiness, you may not be as prepared as you think. According to TIAA’s 2016 Lifetime Income Survey, fewer than half of Americans know how much they have saved for retirement, and only 35% know how much monthly income their savings will generate. At the same time, TIAA’s Voices of Experience Survey reveals that Americans are retiring earlier, with 54% leaving the workforce behind before age 65. (For more, see Early Out: A Realistic Plan to Retire Younger.

Mid-career is a good time to sit down and assess where you are and where you hope to be when you retire. You may find that you're already doing a good job – or that you really have to step it up now in order to reach the place you hope to be by the time you retire. The older you get, the more it will take to catch up, so the time to start is now.

How to Assess Your Retirement Readiness

Despite all the discussion of the need to prepare more carefully than ever before for retirement, many pre-retirees are still falling short. This is true even for people who are quite close to R-Day: Only 39% of American sixtysomethings have more than $250,000 set aside for their later years, according to the 16th Annual Transamerica Retirement Survey. 

Perhaps the only thing worse than having too small a nest egg is not saving anything at all. The Federal Reserve estimates that one in five people who are age 55 to 64 have zero set aside. Even if you're that badly off at mid-career, you still have time to put yourself in a much better place before you retire.

To know where you are – the only way to figure out what to do next – the first step is to assess your own retirement readiness. The good news: You're still at mid-career. (To see how you stack up compared to others in your age group, see The Average Retirement Savings by Age for 2016.)

Tally Up Your Current Savings

The first step in gauging how well you’ve prepared for retirement is looking at what you’ve saved so far. That includes money you’ve accumulated in an employer’s retirement plan, such as a 401(k) or 403(b), as well as an Individual Retirement Account (IRA). If you have money saved in an IRA CD or a taxable investment account, you’d want to add those in as well.

If you haven’t saved anything at all, start by determining the best place(s) to allocate some of your income for retirement. An employer’s plan should be your first choice if your company offers one, particularly if there’s a matching contribution. Just remember to save at least enough to qualify for the match. 

 A 2015 report from Financial Engines found that in 2014 employees who didn’t chip in enough to get the company match missed out on an average of $1,336 in added savings. That’s money you can’t afford to lose every year if you’re already falling behind on the savings path. (For more, see How 401(k) Matching Works.) 

It's also important to tally up your other assets: the value of your home, any expensive art or other valuables, your car(s), even a boat if you have one. Also figure in any income you think may come to you in the future, such as an inheritance you already know about. Don't forget to estimate how much Social Security or other pension income might come your way, even though mid-career is a little soon to know those figures in detail. What Will My Social Security Check Look Like? can help.

Be Realistic About Your Retirement Goal

Once you have an idea of what you have saved, the next step is comparing that to your target retirement number. This means understanding how much monthly income you’ll need your savings to generate once you’re no longer working. According to TIAA’s Lifetime Income Survey, 45% of high-income earners knew how much income they could expect in retirement, while only 27% of lower-income earners were able to say the same. We'll be talking more about how to set your target number in the next installment of Your Mid-Career Guide to Retirement Planning.

Some general points to get you started: Ultimately, your individual number is based on several factors: your age and current savings rate, the age at which you plan to retire, how much you have saved already and the type of lifestyle you plan to maintain in retirement. The longer your time horizon is, the better, particularly if you haven’t made much progress to date with saving.

For example, a 30-year-old making $45,000 a year would need to defer 10% of his or her income into a 401(k) to retire at age 65 with $1 million in savings. That’s assuming a 7% annual return and a 100% employer match. By comparison, a 50-year-old with that same salary and a $200,000 401(k) balance would need to save 35% of income to hit the $1 million mark. If you're in your 40s you're somewhere in the middle. If you're not getting that 7% return, you'll need to save even more.

Running the numbers on what you’ve saved versus what you need to have in retirement can be eye-opening, even depressing, but it’s necessary to be realistic about your future and ensure that you’re on the right track. From there you can move on to the next step, which is finding ways to increase your savings.

Look for Opportunities to Fill the Gaps

If you’ve determined that your current savings aren't going to be enough to cover your retirement needs, there are two things you can do to address the potential shortfall. The first is to step up your savings rate.

If you can’t afford to go from saving 10% of your salary in your 401(k) to 20% right away, you can still take smaller steps to move toward that goal. Check with your plan administrator to see if your plan allows for step-up contributions and elect to increase your deferrals by 1% to 2% each year. That way you’re saving more, and if you’re getting raises at the same time, you won’t miss the extra money that’s coming out of your paycheck. In 2016 and 2017, you can save up to $18,000 in a 401(k). 

If you’re already maxing out your employer’s plan, it’s time to look at where else you can save for retirement while enjoying some tax benefits. For 2016 and 2017 you can park up to $5,500 in a traditional or Roth IRA. You can save an additional $1,000 per year if you’re 50 or older. Note that there can be income limitations to the deductibility of IRA contributions if you or your spouse (if married filing jointly) are covered by a retirement program at work. Click here for details.

A health savings account (HSA) is another savings avenue if you’re enrolled in a high-deductible health plan (HDHP). These plans allow you to save money for qualified medical expenses, but once you reach 65 you can make withdrawals from an HSA for any reason penalty free. You’ll just pay regular income tax on the distributions.

The Bottom Line

Getting retirement ready is an ongoing process and requires careful planning. Looking at where you are now and where you’d like to end up is essential for shaping your goals. A financial advisor can help you with making the right decisions to increase your savings. If you’re thinking of consulting an advisor, be sure to check the fee schedule, so you understand what you’re paying for.