How to Use the Retirement Calculator
This calculator helps you determine if your current savings plan is on track to meet your retirement income goals. Here’s a breakdown of each field:
- 1. Your Ages: Enter your current age and the age you plan to retire. This determines your investment time horizon.
- 2. Your Savings: Input your current retirement savings and the amount you contribute monthly. Be honest for an accurate projection!
- 3. Growth Rates: The "Pre-Retirement" rate is the average annual return you expect while saving (typically higher, e.g., 7-8%). The "Post-Retirement" rate is a more conservative return you expect your nest egg to generate while you withdraw from it (e.g., 4-5%).
- 4. Your Goal: Enter the desired monthly income you wish to live on during retirement. The calculator will determine the total nest egg needed to support this income.
- 5. Calculate: Press the button to see your results. The tool will project your total savings and compare it to your goal, showing if you have a surplus or a shortfall.
Frequently Asked Questions
What is the "4% Rule" and how does it relate to the Post-Retirement Rate?
The "4% Rule" is a common guideline in retirement planning. It suggests that you can safely withdraw 4% of your initial retirement savings portfolio each year (adjusting for inflation) with a low probability of running out of money. The "Post-Retirement Growth Rate" in our calculator is directly related to this. A 4% withdrawal rate assumes your investments are still growing at an average of 4% or more to be sustainable.
Does this calculator account for inflation or taxes?
No. This calculator provides a projection based on the numbers you enter and does not account for the future effects of inflation (which reduces purchasing power) or taxes on your investment gains and withdrawals. You should consider these as separate factors in your planning. The "Desired Monthly Income" should ideally be an estimate in today's dollars, and you should plan for that amount to increase with inflation.
What if I have a shortfall?
A projected shortfall is not a cause for panic—it's a call to action! The calculator will give you an estimate of how much more you would need to save per month to close the gap. Even small increases in your monthly contribution can make a huge difference over many years due to the power of compound interest.