With today’s uncertain economic environment, it is even more critical to do the math, know the facts, plan prudently and make sure you stay on track for retirement.

Let’s say you’ve been saving for retirement and you’re in the middle of your earning years.

How are you doing?

It’s hard to know offhand. Many of us are not savvy about investments and feel overwhelmed with the numerous money decisions that we face. What’s more, it’s often difficult to conceptualize our retirement days, whether they are many years from now, or around the corner.

To get an accurate picture you might want to enlist the services of a fee-based financial planner. 

Watch a related video on choosing a financial adviser

For a quick idea, read on. A study that appeared last year in the Journal of Financial Planning provides a way to determine if you’re on track or if you need to step up your savings.

The study’s authors assume that you will need to replace 80 percent of your pre-retirement income — your gross salary minus the amount you’ve been saving for retirement. The reasoning: You won’t be saving for retirement once you’re retired. The authors also assume that pre-retirement earnings and post-retirement cash flow needs to grow in line with inflation at 2.5 percent annually, and that upon retirement, you will use the money to purchase inflation-indexed annuities that guarantee income for life.

Check out the table for an indication of what your current savings rate should be. For example, let’s say you’re 40 years old and you earn $60,000 a year. If you have not saved anything up to this point, your savings rate should begin immediately at 17.6 percent.

Insert table: http://www.bankrate.com/brm/news/Financial_Literacy/retirement_investing/retirement_roadmap_a3.asp?

Crunching the numbers

Now let’s assume you’re 40 with an income of $60,000, and you started saving at an earlier age. Right now you have $100,000 saved up.

What should your savings be in that case?

Take the amount you saved so far and divide that by $10,000. If you’ve saved $100,000 so far, dividing by $10,000 equals 10.

Now multiply that (10) by .57 percent (the figure in the fourth column of the table). The result is 5.7 (10 x .57 = 5.7).

Now subtract the 5.7 from 17.6 percent (the figure in the third column). The result is 11.9 percent. This means that if you’re 40 years old with an income of $60,000 and savings of $100,000, you should now be saving 11.9 percent of your gross income.

Multiply 0.57 percent (the figure in the fourth column) by each $10,000 you have accumulated. That equals 5.7 percent (10 x 10,000 if you have $100,000 saved.) Next subtract the total (5.7 percent) from that 17.6 percent savings rate to get 11.9 percent.

This study takes Social Security income into account, which replaces a higher percentage of income for low-wage earners, and a lower percentage of income for high-wage earners. (To simplify their calculations, the authors assume that full benefits are available at age 65, but in reality, the study’s authors recommend that you wait until full retirement age to collect the full benefit.)

Of course, if your salary increases in the future, you’ll need to make adjustments. The numbers aren’t foolproof, but these rates have a 90 percent chance of success, say the authors. They ran each combination of age, income level and savings rates through 2,000 market scenarios in “Monte Carlo simulations” — altogether 72 million simulations — to get these numbers. The portfolios they used in their research resembled those of target-date funds, which become increasingly conservative as retirement draws near.

Notice that the savings rate trends upward as you get older. That’s why it’s easier to meet your retirement goals if you get an early start. But as the chart shows, it’s never too late to get started.

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