Retirement may feel like a long way away, but it takes planning and saving far before your last day at work if you want to enjoy financial freedom in your retirement years. Whether you are decades from retirement or it is just a few years away, follow these steps to understand your retirement needs and whether or not you are on track.

Estimate your financial needs in retirement

Millions of people put little thought into retirement until they reach their golden years, but you shouldn’t make the same mistake. A May 2019 survey at Bankrate found that the biggest financial regret of Americans is not saving for retirement early enough. Thanks to the time value of money, the sooner you start saving, the better.

But what are you saving for? That’s what we are going to figure out in this first step of your retirement review. To understand if you are on track for retirement, you need to understand how much you need.

Financial experts suggest you need around 60% to 80% of your income from your working years to maintain the same quality of life in retirement. If you make $50,000 per year at retirement, that means you’ll want to bring in $30,000 to $40,000 per year in retirement. That translates to $2,500 to $3,333 per month.

But don’t forget about inflation. If you plan to retire in 2050, the dollar will be worth about half of what it is today according to the inflation calculator at SmartAsset. Also, consider future raises and cost of living adjustments in your math.

Project your cash flow in retirement

One of the most popular US government benefits is Social Security. While it isn’t fun to see the tax taken out each payday, the future benefit is hugely valuable. Login to your Social Security account online to get an estimate on what you will get in the future from your contributions.

If your retirement plan requires $4,000 per month in income and your Social Security benefit is going to be worth $1,700 per month, for example, you will need an additional $2,300 per month from your own savings and investments.

The popular 4% rule helps us estimate what percent of our assets we can draw per year without running out of money. If you need $2,300 per month, which is $27,600 per year, we can use the 4% rule to find out how much you need in retirement savings. For this benchmark, you would need $27,600 / 4% = $690,000.

That can include retirement accounts like a 401(k) or IRA or other savings and investments like an Evati account.

Build a plan to bridge the gap

If you are shy of your retirement goal, it’s time to get to work bridging the gap. Let’s say you are 35 years old, plan to retire at 65, and currently have $100,000 in retirement savings. You’re well on the way to a good retirement, but you need to stay focused to hit your target.

The free compound interest calculator at the SEC website can help you back into the monthly savings you need to reach your goal. If you invest well, the power of compounding will make it much easier to reach your goal than simply putting your cash in a savings account or under the mattress.

Over any long period of the time, the S&P 500 offers around 10% returns, though you should probably use a lower estimate for your growth rate to be conservative. If you can save $500 per month at 8% for 30 years, you’ll end up with about $745,000. That’s enough to meet the goal in the example above.

But the power of compounding works best when you start early. Don’t delay if you are not already saving for retirement. If you can’t afford to save as much as you want, saving something is better than nothing. Even $5 per month counts! Those savings are key to your long-term financial prosperity.

Make your money work for you

At Evati, we help you automatically save for your big goals with professionally managed portfolios. Just enter your goal details, for example, the amount you want to have saved for retirement, and Evati helps you figure out the rest.

What’s most important is that you don’t ignore your money. If you take steps to ensure you are on track for retirement, you’ll be destined for the future you want. Make your savings and investments a priority so you can rest easy that you are on autopilot for the retirement of your dreams.