Do You Have Enough Money in Your Brokerage Account? Here's How to Find Out

Regularly checking your progress is key to staying on track.

Saving and investing are important to the health of your personal finances -- especially if you're working toward a financially comfortable retirement. But blindly throwing money into your accounts without a plan is a good way to end up with a serious shortfall down the line.

It's important to regularly check on your retirement accounts, including 401(k) and brokerage accounts, to adjust your investments and evaluate your progress towards your savings goals.

To properly assess your progress, you need to know how much money to aim for at retirement. Once you figure out your retirement number, work out your investment goals for each step along the way.

Finding your retirement number

A common rule of thumb is that the typical person needs around 80% of their pre-retirement income to live the same lifestyle during retirement. However, there's no blanket rule that applies perfectly for everyone.

Your retirement expenses will depend on a variety of factors, and they are different for each person. Those factors can include:

• When you retire
• Your choice of investments
• The lifestyle you want
• Where you want to live
• Your Social Security earnings
• Whether you own property
• Passive income sources
• How long you live
• Your general health

Once you've worked through all of the factors above (and anything else you think is relevant), you can estimate the monthly income you need for your own best post-retirement life. Multiply that number by 12 to get your annual income requirement.

To turn your annual number into your overall retirement number, you need to do a little math (or have a retirement calculator do the math for you). There are a variety of methods you can use to figure out your retirement number, and the best one for you depends on how you plan to use your retirement savings.

In general, a good rule is to ensure you can live entirely on interest and investment returns each year, so that you don't dip into your principal savings. So long as your accounts are growing at a consistent rate as you withdraw, you won't need to worry about running out of money during retirement.

Whether you do the math by hand or use an online calculator, be sure to account for inflation (the decline in purchasing power of money over time). Just like $1 doesn't buy what it used to, your retirement savings will lose value as the years go by. It's important to account for that.

Appraising your current investments

Your overall retirement number tells you where you need to go. You can also use it to figure out the savings milestones you need to hit along the way.

A good retirement or investment calculator can give you an idea of how much your money should grow each year to meet your goals. Alternatively, you can use historic stock market returns (and a bit of math) to create your own progress checks.

Then it's a matter of comparing your current account balances with your goal targets. Most people save for retirement in three different types of accounts:

• 401(k) account
• Individual Retirement Account (IRA)
• Traditional brokerage account

Both 401(k) accounts and IRAs are designed for retirement savings. However, while any individual can open an IRA through a bank or brokerage, you can only get a 401(k) through an employer.

Most retirement investing advice suggests that you should contribute first to your 401(k), if you have one -- particularly when you can receive a company match. Once you've maxed out your 401(k) contribution (or, at least, done enough to get the full company match), you may want to put money into an IRA or traditional brokerage account.

You can save with one type of account or a combination of accounts. Include all of your retirement and investment accounts when evaluating your retirement progress.

How much you need in your IRA and traditional brokerage accounts depends on how much you have in your 401(k). For example, say your goal is to have $200,000 by the time you turn 40. If you have $120,000 in your 401(k) account, then you need a total of $80,000 or more in your brokerage accounts to stay on track.

One of the hardest parts of keeping up on retirement savings is that there are a lot of variables, many of which you can't predict with 100% accuracy. We don't know how long we'll live or how the market will move. But, with a bit of planning, you can give yourself the best shot at a happy retirement.