Do you have enough to retire in comfort? Here’s how to calculate it and how to invest for retirement the smart way.

Americans aren’t as confident about our retirement as we would like to be. Nearly two-thirds of 40-somethings have less than $100,000 in their retirement accounts, 28% of 60-somethings have less than $50,000, and 66% of Millennials have nothing saved at all.

Will your retirement investments be enough? And if not, how do you get enough to enjoy your golden years?

Here’s how you can assess if you’re on track with retirement—and if not, here’s how to invest for retirement the right way.

A Simple Retirement Calculation

First, you need to figure out if you’re on track for retirement—and if you’re not, you can assess how to get your investments where they need to be.

To figure this out, try this simple five-step calculation:

1. Calculate your total annual retirement contributions
2. Multiply contributions by the years remaining until retirement
3. Add your current retirement savings
4. Divide by the number of years you expect to live in retirement
5. Add any guaranteed sources of income

Once you have that number, compare it to your total annual expenses to see if you’ll have enough to cover your usual living expenses. Here’s a hint: most people round down the number of years they expect to live, but unless you’re already in frail health, if you plan to retire at 65, you should calculate based on living an additional 25 years (until age 90).

Keep in mind that this calculation does not account for inflation, the growth rate of your investments, or any life crises. Unfortunately, unless you have a fully functional crystal ball in your junk drawer, it’s impossible to predict what these will be.

For the sake of simplicity, you can conservatively assume inflation will rise by 3% and your assets will grow by 3%, so in an ideal world, the two should cancel each other out.

Another common recommendation is the 4% rule, which simply states that you should withdraw 4% of your retirement savings every year to ensure they last as long as you need. By this logic, you should take your monthly expenses and divide by 4%. So if you need $50,000 per year to live comfortably, you would need $1.25 million by the time you retire.

Keep in mind, however, that the 4% rule was created based on historical data from stock returns from 1926 to 1976—a lot has changed since then!

These calculations are not an end-all-be-all. You should perform more detailed calculations with a financial advisor. However, this gives you a good starting point.

How to Invest for Retirement

Are your savings falling short? Take a deep breath. You’ve already done the math to figure out that you need to save more—that’s the scary part. Now, you can figure out an answer.

If your retirement savings could do with a boost, here’s how to invest for retirement the right way. Keep in mind that there are a lot of other strategies out there—this list is intended to get you started.

Start Early

The single best thing you can do, regardless of any other investment strategy, is to invest early.

This is how you can take advantage of compounding, which is when you reinvest interest and capital gains for additional income. So if you invest $100 with a 5% annual interest rate, you would have $105 the first year and $110.25 the second year, since you earned interest on the original $100 and the $5 interest.

Now let’s say you invest in the stock market when you’re 20. You won’t touch that money for several decades, which means it has time to grow. On average, the stock market has historically earned 10% returns annually. That doesn’t mean that you won’t experience higher or lower years, but rather that you’ll have time to take advantage of the highs and recoup the lows. It’s all about time in the market, not timing the market.

And if you’re not starting early? There’s no time like the present. Every little bit helps.

Use Your Employer Plan, But Don’t Stop There

If you have an employer-offered retirement account, now is the time to take maximum advantage of it. The nice thing about employer-sponsored retirement plans is that saving is automatic—you can opt to have a percentage taken out of your paycheck every year, which means investing without any thought required.

If your employer doesn’t offer a 401(k) plan or you work for yourself, you still have options. Open an individual retirement account (IRA) instead—this is a tax-advantaged plan that’s basically a box for almost any investment assets you want to package inside it. Keep in mind that many people incorrectly treat an IRA like it invests automatically (it doesn’t) and you need to manage your assets to achieve growth.

Even if your employer offers a 401(k) plan, it’s still a good idea to take advantage of additional retirement accounts like IRAs. This allows you to maximize your retirement savings and tax benefits.

Consider Robo-Advisors

If you don’t know very much about investing or you’re not good about setting money aside, it’s time to become BFFs with robo-advisors.

These handy little tools are basically investment brokers, but without the fees or the thought process. A robo-advisor is a platform offered by investment firms that relies on algorithms to automatically invest on your behalf. These often include automated contributions and round-ups for purchases made on your debit card.

Here are some of the best robo-advisors. Remember, there’s nothing stopping you from using multiple robo-advisors to take advantage of features you like across various platforms.

Ready to Invest in Your Financial Future?

Listen, we get it. Figuring out how to invest for retirement is hard. But you’ve already done the hard part—figuring out whether you’re on track. Now it’s time to get the right investment vehicles in your portfolio.

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