How to use the Retirement Calculator
- Enter your current age, the age you want to retire, and the age to plan to.
- Add your current savings and how much you contribute each month.
- Set the expected returns before and after retirement, and the inflation rate.
- Enter the monthly income you want in today’s money and any pension you expect, then read the shortfall or surplus.
Features
- Projected savings at retirement, in future and today’s money
- Nest egg needed for an income that keeps up with inflation
- Shortfall or surplus and the extra monthly saving needed
- Accounts for pension or Social Security income
- Age-by-age chart and table with CSV
- Shows the age your savings would last until
How the calculation works
A retirement plan has two phases. In the saving phase your current savings and monthly contributions grow at the return you expect before retirement. In the spending phase you withdraw an income each month while the rest stays invested, usually at a lower, more cautious return. The calculator models both:
- Projected savings = current savings × (1 + m)N + contribution × ((1 + m)N − 1) ÷ m, where m is the monthly equivalent of the yearly return and N the number of months until retirement. Contributions are made at the end of each month.
- Income needed at retirement = the income you want in today’s money, minus pension or other income, raised by inflation until your retirement date.
- Nest egg needed = the amount that, invested at the after-retirement return, can pay that income at the start of every month until the age you plan to, with the income rising with inflation.
The difference is your surplus or shortfall. If there is a shortfall, the calculator shows how much more you would need to save each month, at the same return, to close it.
Example
You are 30, plan to retire at 60 and want your money to last to 85. You have 50,000 saved and add 500 a month, expecting 7% a year before retirement and 5% after, with 3% inflation. You would like 3,000 a month in today’s money. Your savings are projected to reach about 965,339. But 3,000 today will be about 7,282 a month in 30 years, and funding that for 25 years needs about 1,735,726. The shortfall is around 770,387, which saving about 659 more a month from now would cover.
Rules of thumb
- The 4% rule. A long-standing guideline from US research suggests withdrawing about 4% of your savings in the first year of retirement and raising the amount with inflation. That implies a nest egg of about 25 times the yearly spending you need from savings.
- Income replacement. Planners often suggest aiming to replace roughly 70% to 80% of your pre-retirement income, because some costs, such as commuting and saving for retirement itself, fall away.
- Start early. Money saved in your twenties has decades longer to compound than money saved in your fifties.
Choosing your inputs
| Input | Things to consider |
|---|---|
| Return before retirement | Depends on your mix of stocks, bonds and cash, after fees. Test a cautious and an optimistic figure. |
| Return after retirement | Usually lower, because portfolios shift toward bonds and cash to reduce risk. |
| Inflation | Many central banks target about 2%; using 2.5% to 3% adds a margin of safety. |
| Plan-to age | Plan beyond the average. Running out of money late in life is the bigger risk. |
| Other income | State pension, Social Security or a workplace pension, in today’s money. |
Limits of any projection
Real returns vary from year to year, and the order of good and bad years matters once withdrawals start. Taxes, healthcare costs and one-off expenses are not modeled. Revisit the plan every year or two and adjust your contributions. For individual pieces of the plan, try the Compound Interest Calculator, the SIP Calculator and the Inflation Calculator.
All results are estimates for information only and are not financial advice; consider speaking with a licensed financial planner before making major decisions.
Frequently asked questions
How much do I need to retire?
It depends on the income you want, the other income you expect and how long retirement lasts. Enter those figures here; as a rough check, the 4% rule suggests about 25 times the yearly amount you will draw from savings.
Why is the income needed at retirement higher than what I entered?
You enter the income in today’s money. Inflation raises the cost of living every year, so the same lifestyle costs much more in future money. The calculator converts it for you.
What return should I expect after retirement?
Usually lower than before retirement, because most people move into safer investments. Using a figure one or two points lower is a cautious approach.
How is the extra monthly saving calculated?
It is the monthly amount that, invested at your pre-retirement return until you retire, would grow to exactly the shortfall.
Does this include taxes?
No. Use after-tax figures for income, or treat the result as a pre-tax target and leave room for tax on withdrawals.