Most people check their retirement plan the way they check the weather: once in a while, and only for today. The plan says you need a certain amount at 65, and you have some amount now. Whether the two are on speaking terms is hard to tell.

The fix is to treat the plan as what it really is: a path. If your plan is sound, it doesn't only say where you'll be at 65. It also says where you should be next month, next year and every year in between. Being "on track" means being near that path today.

A plan is a path, not a finish line

Suppose your plan starts with $100,000 and expects you to save $6,000 a year, with modest investment growth. A year from now, it expects about $112,000. Two years from now, about $125,000. Those year-by-year balances are your plan's expected path.

Comparing yourself with the end point (a balance at 65) tells you little until you're nearly there. Comparing yourself with the path tells you something every month.

How to check it yourself

  1. Find where the plan expected you to be by now. Take the plan's balance at the start of the year and the one it expects at the end, and go part of the way between them. Three months into a year that runs from $100,000 to $112,000, the plan expects about $103,000.
  2. Add up what you actually have. Use the balances of the same accounts the plan uses: your 401(k), IRAs, HSA and brokerage accounts. Leave out your house and your checking account, unless the plan counts them.
  3. Compare. If you have $104,500, you're $1,500 ahead, or about 1.5%.

The percentage matters more than the dollars. Being $5,000 behind is a lot at $50,000 and very little at $1 million.

Ahead or behind, and why

There are only two reasons a balance can differ from the plan: what you put in, and what the markets did.

  • Contributions. Did you save what the plan assumed? A raise you saved, a bonus you didn't, a missed employer match: all of it shows up here.
  • Markets. Everything else. If your accounts grew faster than the plan's expected return, you're ahead for reasons you didn't control, and the reverse.

Splitting the gap this way is what makes it useful. Falling behind because markets dropped calls for patience. Falling behind because you stopped saving calls for a decision.

Don't read too much into one month

Markets move several percent in a month without meaning anything for a 30-year plan. A sensible rule is to call anything within 1% of the path "on pace", and to look at the trend over months, not a single reading. A plan that is 2% behind after a bad quarter, and climbing back, is in better shape than the number alone suggests.

When you're behind: what it would take

"Behind" is only useful if it comes with what it would take to catch up. Two levers cover most plans:

  • Save more each month until you retire.
  • Spend a little less in retirement.

A simulation can tell you how much of either would bring your plan's chance of success back to where it was when you made the plan. Often the answer is smaller than people fear: a modest gap early on, given decades to compound, needs a modest change.

Change the plan when your life changes, not when markets do

If you change jobs, decide to retire earlier, or your spending plans change, your old path no longer describes the plan you're actually following. That's the time to set a new baseline from your real balances today. A bad month in the markets isn't: that's exactly what the pace measurement is there to show.

Try it

The retirement calculator builds a plan and shows its expected path. The retirement savings by age calculator shows what a plan like yours expects at each age. RetirementPace Plus does the monthly comparison for you, and the exact method is in the methodology.