Retirement Savings Calculator
Plan and estimate your retirement savings with this comprehensive tool. Input your current savings, annual contributions, investment returns, and desired retirement age to calculate your future nest egg. This calculator considers factors like inflation and tax implications to provide accurate projections.
What is Retirement Savings Calculator
A Retirement Savings Calculator is a tool used to estimate how much money an individual may need to save for retirement based on various factors such as current age, desired retirement age, current savings, expected rate of return on investments, and desired retirement income.
To use a Retirement Savings Calculator, you typically need to provide the following information:
- Current Age: Your current age at the time of using the calculator.
- Desired Retirement Age: The age at which you plan to retire.
- Current Retirement Savings: The total amount of money you have already saved for retirement, including any investments or contributions to retirement accounts.
- Annual Income: Your current annual income.
- Expected Rate of Return: The anticipated average rate of return on your retirement investments, often expressed as a percentage.
- Retirement Income Replacement Percentage: The percentage of your pre-retirement income you expect to need during retirement (e.g., 70%).
- Life Expectancy: An estimate of how long you expect to live after retirement.
Based on this information, the Retirement Savings Calculator will estimate:
- Total Required Savings: The estimated total amount of money you will need to save for retirement based on your desired retirement income and life expectancy.
- Monthly Savings: The suggested monthly savings amount required to reach your retirement savings goal.
- Retirement Income: The estimated income you will have during retirement based on your savings, investments, and other sources of income.
- Shortfall/Surplus: Whether you are on track to meet your retirement savings goal or if there is a shortfall that needs to be addressed.
Please note that Retirement Savings Calculators provide estimates and assumptions based on the information provided. The actual savings needed and investment results may vary due to changes in income, expenses, investment performance, and other factors. It's advisable to consult with a financial advisor or retirement planner for personalized guidance and recommendations regarding retirement savings strategies.
How long can I expect my retirement savings to last?
If you've saved up money for your retirement, you can work out how long this will last you. How many years your nest egg will last you depends on a number of factors, including the size of your accumulated savings, interest rates, how much you spend, and how much you have coming in pensions, Social Security, and other forms of income. You can calculate this either using the handy retirement savings calculator or by applying the formula set out below.
To work out how many years your savings will last when you are retired, you must calculate a value for each of four variables, these being P (the size of your savings), E, your outgoings each month, I, your income each month, and R, the annual interest rate. In the formula below, R should be expressed as a decimal, e.g., 5% = 0.05.
Using these figures, you can calculate N, showing how many months you can support yourself with your savings:
N = [ log(12*E – 12*I) – log(12*E – 12*I – P*R) ] / log(1 + R/12)
Either the "log" or "ln" function on your calculator can be used for this, provided you use the same function for all three terms where "log" is written (log represents logarithm in base 10, ln represents logarithm in base e = 2.71828182845904...). Of course, if your income each month is higher than your expenses, you will be in net profit and wouldn't need to touch your nest egg, so you don't need the formula to tell you that you will enjoy a financially solvent retirement for the rest of your life.
Use the formula below if the interest rate is equal to 0:
N = P / (E – I)
Let's resume that you have saved up $100,000 for your retirement, and it earns an annual interest rate of 3%. If your monthly income is $2000, and your outgoings are $3000, then P = 100,000, R = 0.03, E = 3000, and I = 2000. To work out the number of months your savings will last you, we make the following calculation:
N = [ log(36000 – 24000) – log(36000 – 24000 – 3000) ] / log(1 + 0.0025)
= 0.28768 / 0.002497
= 115.21 months, or 9 years and 7 months.
On this calculation, you can see that you will no longer have any savings in less than 10 years following retirement. If you want your savings to last longer than this, you either need to save up a larger nest egg or find ways of cutting down your monthly outgoings.