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Play the Percentages: 45 and Older

• No previous retirement savings—you're starting from zero. If you already have retirement savings (and you're a Schwab client), you can log in and use the Schwab Retirement Planner to run your own numbers.
• You plan to spend 70%¹ of your preretirement, pretax income in retirement, adjusted for inflation and highly likely to be sustainable for roughly 30 years (assumes retirement at age 65).
• Social Security or other income will provide 25% of your retirement income needs each year. Your portfolio will have to provide for the rest of your spending needs in retirement. (We assume a conservative-to-moderate portfolio allocation in retirement, with no intent to leave a portion of the portfolio to any heirs.)
• Your preretirement income will grow (at least enough to keep pace with inflation) during your working years.
• You average a compound annual return of 8% on your preretirement investments, with 2.5% inflation.

• Max out your 401(k) or other employer retirement plan, especially if you receive matching contributions. If you're 50 or older, take advantage of any additional "catch-up" contributions available to you (check with your plan administrator).
• For extra retirement savings, consider the benefits of a deductible traditional IRA or Roth IRA, if you're eligible. People 50 and older can take advantage of the special IRA "catch-up" contributions.
• If you're self-employed, consider a SEP-IRA or QRP/Keogh. You can even set up a defined benefit QRP, which might allow you to contribute even more, based on actuarial assumptions.
• Once you've maxed out all available tax-advantaged retirement accounts, save any extra money in your personal taxable accounts.
• You could spend less in retirement. Remember, our savings targets assume you will retire on 70% of your preretirement, pretax income. You might be able to get by with less than that.
• You might postpone retirement a few years. By retiring later, you can build a bigger retirement portfolio and shorten the amount of time you'll need to sustain retirement spending. You can also increase your potential Social Security benefit by waiting past your normal retirement age before you start receiving payments (up to age 70). For example, if you are able to start saving 25% of your salary at age 45 and maintain that percentage (adjusted for inflation), then you should have a good chance of reaching your goal by age 68 or 69. That's only a couple of years past Social Security's "normal retirement age" of 67 (for someone born in 1960 or later).
• You could settle for a lower probability your portfolio will last. Our savings targets assume a 90% confidence level that your retirement portfolio will last 30 years. You might be willing to accept a lower level of confidence that you'll be able to maintain your standard of living throughout your retirement years.
• You could semiretire and supplement your retirement income by working part-time at something you enjoy. This could be especially attractive if you want to remain active and productive. Working part-time not only generates additional income but also provides intellectual stimulation, social interaction and a feeling of purpose.