Not to preach or sound like some ol' fart, but let me tell you, from the perspective of someone who has reached their 60s, retirement time comes much faster than you think is even possible. I encourage you to spend a few minutes with this retirement calculator to see what your future will hold. More below...»
As described below, the above calculator has the ability to solve for multiple unknowns and it will answer any of your common retirement questions. On the other hand, the below 3 calculators take up less screen space and they may be more appropriate for smaller computing devices. They are also designed to answer one question directly and therefore require less study to use. You might want to check them out as well.
The above calculator takes into account your current retirement savings plus additional contributions from your income as well as (optional) projected wage gains and evaluates your goals. It then charts your post retirement income to see if you are on track to meet those goals.
Update 06/21/2016: Minor assumption change. "ROI during retirement" rate goes into effect on the day the last retirement contribution is made rather than on the day of the first income withdrawal. This is, usually, a slightly more conservative approach. In any event, you won't get exactly the same results as you had gotten previously if your investment rate and retirement withdrawal rates were different. Neither is wrong. The calculator is simply creating your plan using a slightly different financial model.
The calculator has 13 inputs, 4 of them are required:
There are 4 variables which can be calculated. Enter "0" (zero) for one of the four and a value for each of the other three:
There are 5 optional inputs. Any or all can be left at 0.
Retirement planning involves many variables. As with other financial calculators on this site, this retirement planning calculator can solve for multiple unknowns. Below are questions that can be answered based on your own assumptions using values you provide.
Click on the calculator's "Help" button for more details about each input.
Generally, when someone retires, their investments become more conservative. More conservative investments usually have a lower rate of return, yield or interest rate. This is why the calculator gives the user the option for two rates of return — one for the pre retirement investment and one for after retirement. The rate change date is on the date the last contribution is made. Click the schedule button for details.
When it comes to the amount you are contributing toward your retirement, some users many not care to think in terms of percent of income invested. Rather some may rather think in terms of an absolute amount they plan to contribute. If that's the case, set "percent of income invested" to 100% and enter for "annual income" the amount you plan to invest. Naturally the "annual income increase" feature will also work correctly if you select this approach.
If you want to know at what age you can retire given your expected savings plan and income desired, this calculator will tell you as noted above. In order to make this calculation, we have to know how long you want your retirement income to last. But this calculator does not ask you that question. So how do we know this? Behind the scenes, the calculator has a default retirement age. That age is 66. When you enter your life expectancy the calculator calculates the number of years you want your savings to last from the default date. If you want your retirement income from investments to last 20 years (21 withdrawals), you therefore enter 86 for "your life expectancy". Or if you want it to last 25 years, you enter 91 and 0 (zero) for "Your age at retirement". Notice after the calculation, your retirement age will be known, but also your life expectancy will be updated so that the difference between the two will equal the number of years you want the funds to last.
A note about "Desired retirement income": When users are thinking about retirement and the income they want, they normally think about the total income, not the individual components of the income. Therefore, desired income is the total annual income you want when you retire. If you enter income from other sources, such as projected Social Security or pensions, that income will be deducted from the desired income when making the investment calculations. Or stated another way, both the chart and the schedule consider only your investment plan and income before income from other sources. If you want to reach a particular income aside from what may come from other sources, just leave other sources set to zero.
Click on the below plans and the calculator's data will change and the chart will be updated. The point is to show three slightly different sets of inputs and how generally small changes can have a significant impact on the results.
Retirement Plan 1 — even starting at age 35 and saving 5% of income with a 3% increase every year, the savings plan will not allow the user to have a comfortable retirement for their life expectancy. Notice at retirement (age 65), the retirement funds immediately start to deplete as indicated by the red bars.
Retirement Plan 2 — if the user follows this plan, the retirement funds immediately start to deplete, but they will not run out. There was one change made to this plan when compared to plan one. The user settled for 12.5% less retirement income.
Retirement Plan 3 — this plan has the best results. Notice the funds available continue to increase even after contributions have stopped and the user is retired. This is indicated by the slightly darker green bars at retirement age and beyond. The only reason the retirement funds start to deplete later in this retirement plan is due to the inflation adjustment applied to the withdrawals. (See for yourself. Set the "annual inflation rate" to zero and you'll see that the funds continue to grow. [After you make the change, click on the "Calc" button of course.])
Though many, if not all, of the inputs will be self-explanatory at a basic level, we suggest that you review the below information. There are various details which we point out that are important to understand.
Your current age — or the age you plan to start saving/investing.
Your life expectancy — expressed as an age. Your retirement funds have to last for your life expectancy minus your retirement age plus one (to fund your last year of retirement). Currently, a male living in the US who is 20 years old has a life expectancy of 77 years and a female can expect to live to be 81 years. Of course, feel free to change these numbers as you see fit. Or you may wish to use the US Social Security Administration's life expectancy table.
Annual income — expected annual income at the time you start saving for retirement. If you have already started investing then enter your current income.
Annual income increase — assumes your income will go up over the years. Enter the annual average increase that you expect. If you want to allow for inflation, then enter an amount LESS the average annual rate of inflation that you expect. For example, if you expect to get a 3% raise a year and you expect inflation to average 2% a year, then enter 1% since 2% is going to be eaten up by the impact of inflation.
Percent of income invested — enter the percent of income that you plan to save for your retirement fund. Generally speaking, the older you are, the higher the percentage will have to be for you to reach your retirement income goal.
Current retirement savings — if you have already started saving, enter the total amount in your retirement account.
ROI for retirement savings — (return on investment) your expected, annualized average return on your investments. If you were to put your money in a standard saving account (not necessarily a good idea), then this would be the annual interest rate paid on the account.
Your age at retirement — the age you want to retire.
ROI during retirement — your rate of return on your investments after you retire. You could use the same percentage as you use for "ROI for retirement savings" however, normally after one retires they invest their money in assets that are more conservative and that generates a lower rate of return.
Annual inflation rate — if you want to increase your retirement income, then enter an estimated inflation rate. Your income will increase by this amount.
Desired retirement income — what is the total annual income you expect to need on the day you retire including the income from other sources.
Expected income from gov't — if you expect social security income or a government pension enter the annual amount. This amount plus any income from other sources will be deducted from "annual income required" to calculate the amount of income retirement your savings will have to generate.
Other annual income — if you expect income from other sources besides your retirement saving and government social security or pensions enter the annual amount. For example, if you expect a pension from an employer, enter the annual pension amount. This amount and social security will be deducted from "annual income required" to calculate the amount of income your retirement fund will have to support.
Place your mouse over a bar for details about the data at any age. Notice the yellow line shows the retirement savings and the blue line shows the retirement income, and if you put your mouse on a point, you'll see the specifics. The retirement calculator is one of the more important financial calculators on this site. Feel free to let me know how it can be made better.