Retirement Calculator

This retirement calculator will help you estimate how much you can potentially save by the time you retire. The inputs to this calculator are your current age, target retirement age, current savings in retirement accounts, your monthly contribution to your retirement account, and an estimated rate of return you expect to achieve on your retirement portfolio.

Most Americans are underprepared for retirement. More than 50% of Americans don’t know how much they will need to save to be able to retire. And roughly 50% don’t care. That’s a precarious situation to be in.

Are you prepared for retirement?

Imagine this! You have retired. You no longer receive a regular paycheck. You are aging. You cannot work because of your health. You no longer have that great employer-provided health insurance. You also need prescription medication for your chronic health condition. You have always loved to travel. However, you lacked the time while you were working and always thought that you would travel the world after retirement. Now you have all the time in the world and you have the money to take a lovely vacation. But hold on! You went to your doctor for a routine visit and the doctor said you are going to need a procedure. It’s not super urgent but it’s recommended that you get it done in a couple of months. Insurance will only cover half the cost. You have the money for the procedure but then there will be no money left for your vacation.

Okay! I am not trying to scare you. Just want to make you aware of what can happen once you retire. You will be fine as long as you prepare for it.

Saving for Retirement Calculator

How much do you think you’ll need to save to be able to retire? Use this retirement calculator to see how much you can potentially have at retirement age. If you think you need more, you need to increase your contributions or work longer.

Calculator Inputs

To use the above calculator, enter your current age, the age you plan to retire, your current retirement savings, the amount you plan to contribute to your retirement account each month, and the expected rate of return from your retirement account. Note that the S&P500 has returned about 10% annualized between 1926 and 2018, with a lot of ups and downs in between. Financial pundits expect the next decade to return lower than average returns. Also note that this calculator is just going to provide you with an estimate and actual returns may never realize.

Planning for retirement

There are various guidelines to arrive at a number. Some say they would be comfortable with a million dollars or two in their accounts. A common way is to use a number between 60% and 100% of your pre-retirement income as your annual income. Another way is to use a percentage of the market value of your home.

You may not need 100% of your pre-retirement income, assuming that your mortgage and other loans have been paid off. You may also be in a lower tax bracket. So you might need only 75% of your pre-retirement income in retirement. However, after retirement you may have spare time and may want to travel more. Your healthcare expenses may be higher. If you plan to travel very frequently, you may likely need 100% of your pre-retirement income.

Here are some costs that you need to consider so make sure you account for them in your retirement planning.

• Healthcare costs – As you age, your health insurance premiums will most definitely go up. You may also need to make provisions for any prescription drugs or routine/ emergency procedures.
• Travel – You may desire to travel in retirement given that you are no longer working, either to visit family and friends or visit places you have never seen.
• Hobbies – In retirement you will have a ton of time and may desire to take up a new hobby or two. Gardening, quilting, knitting, while they sound great, are expensive hobbies.
• Dining out with friends – Your expenses on dining out may go up as you hang out with your partner or friends.
• Charity & Gifts – You may have thought about your legacy as you age and may wish to make charitable contributions and gifts.
• Property taxes and homeowners’ insurance – By the time you retire, you may have paid off your mortgage. However, you will still have property taxes and those go up over time. Also, homeowner insurance premiums may rise over time.
• Rent – Or you may have decided to downsize and rent or buy a condo. Make a provision for rent payment or condo fees.

Saving for Retirement

Now that you know how much you can save by retirement, let’s see if that amount is going to be enough for you to live a cushy retired life, to leave some inheritance to your children and grandchildren, to travel, to spend on healthcare, etc.

Let’s say your pre-retirement income is $100,000 and let’s assume that you would like to earn 70% of that amount after you retire. That takes us to $70,000. Let’s assume a conservative rate of 4% at which you can withdraw from your retirement account each year. To be safely able to make that withdrawal without running out of savings you would need 70,000/0.04 = $1,750,000 in your account at retirement.

Come up with your own estimates and then play with the above calculator to see how you can arrive at your retirement goal. Then, if the number is not enough to match your retirement goals, see if you can cut your monthly expenses and put that money in your retirement account. Or perhaps you need to adjust your retirement age. Many people are unprepared for what to expect in retirement. Plan early and save as much as you can. If you are in the United States and have a 401(K), you can contribute up to $19,500 of pre-tax money each year to your 401(k) account.

Click on retirement plans and target-date funds to learn more on those related topics.

Happy Investing!