Retirement Savings Calculator
Planning for retirement is a critical step towards financial security. Our Retirement Savings Calculator helps you estimate how much you'll have saved by your retirement age and whether that amount will be sufficient to cover your desired annual income throughout your retirement years. By inputting your current financial situation and future expectations, you can gain valuable insights into your retirement readiness.
Your Retirement Outlook:
Understanding Your Retirement Savings
Retirement planning involves several key factors that influence how much money you'll need and how long your savings will last. This calculator takes into account your current age, your target retirement age, and your estimated life expectancy to determine the duration of your pre-retirement savings period and your retirement phase.
Your Current Retirement Savings and Annual Savings Contribution are crucial for building your nest egg. The higher these figures, the more substantial your savings will be. The Expected Annual Return (Pre-Retirement) is the average growth rate you anticipate on your investments before you retire. This rate significantly impacts the power of compounding over many years.
Once you retire, the Expected Annual Return (During Retirement) is the rate at which your remaining savings will continue to grow, while also being drawn down for living expenses. Your Desired Annual Retirement Income (Today's $) is the amount you believe you'll need each year to maintain your lifestyle, expressed in today's purchasing power.
Finally, the Expected Annual Inflation Rate is vital. Inflation erodes purchasing power over time, meaning that the same amount of money will buy less in the future. The calculator adjusts your desired retirement income for inflation, providing a more realistic target for your future needs.
The results will show you your projected total savings at retirement, the inflation-adjusted income you'll need, and the total nest egg required to support that income. It also highlights any potential gap or surplus in your savings and estimates how long your funds might last. Use these insights to adjust your savings strategy, investment approach, or retirement timeline to achieve your financial goals.
Example Scenario:
Let's consider an individual who is 30 years old, plans to retire at 65, and expects to live until 90. They currently have $50,000 saved and contribute $10,000 annually. They anticipate a 7% pre-retirement return and a 5% post-retirement return, with a desired annual income of $60,000 (in today's dollars) and an inflation rate of 3%.
Based on these inputs, the calculator would project their total savings at retirement to be approximately $1,916,182. However, due to inflation, their desired annual income of $60,000 today would need to be around $168,828 per year at retirement. To sustain this income for 25 years (from age 65 to 90), they would need a required nest egg of about $3,302,000. This indicates a significant gap of approximately -$1,385,818, meaning their savings would only last for about 13 years into retirement, rather than the desired 25 years. This example clearly shows the importance of adjusting inputs to meet retirement goals.