A retirement calculator is a simple way to estimate how much money you will have when you retire if you continue to invest at the same rate as you are investing now.
But keep in mind that a retirement calculator is not a substitute for professional advice. We recommend working with an investment professional if you need assistance with your investments. They will help you understand what your money is doing.
What is retirement?
To retire is to leave active employment, and for most retirees, retirement lasts the rest of their lives.
Why Should You Retire?
There are numerous factors that influence a person’s decision to retire.
Physical or mental health can influence a person’s decision to retire; if a worker is not physically strong enough, becomes disabled, or suffers from a mental illness, he or she may be forced to retire.
Physical or mental health can influence a person’s decision to retire; if a worker is not physically strong enough, has a disability, or has mentally declined too much to perform the duties of their job, they should probably consider retiring, or at the very least look for a new job that better accommodates their health. However, it is most common between the ages of 55 and 70.
Retirement is an important consideration for everyone, and most people choose to retire when they are ready and comfortable with the decision, rather than when they are forced to retire for various reasons such as illness or disability.
Using a retirement calculator
First, enter your current age, income, savings balance, and monthly retirement savings. That should give you a good idea of where you stand. The retirement calculator assumes salary and inflation increases.
How Much to Save for Retirement
Naturally, the next question is how much money should be saved for retirement. Simply put, it’s a loaded question with few definitive answers.
It will depend on each individual and factors such as how much income will be required, entitlement to Social Security retirement benefits, health and life expectancy, personal preferences regarding inheritances, and many other things.
Some general guidelines are provided below.
The 4 % rule
People who have a good estimate of how much they will need in retirement can divide this figure by 4 percent to calculate the nest egg needed to support their lifestyle. For example, if a retiree estimates that they will need $100,000 per year, the required nest egg is $100,000 / 4% = $2.5 million.
According to some experts, saving 15 to 25 times a person’s current annual income is sufficient to last them through retirement. Of course, there are other methods for calculating how much to save for retirement.
The calculations here, as well as many other retirement calculators available, can be useful. It can also be beneficial to speak with licensed professionals who assist people in planning their retirement.
The Rule of 10%
This rule recommends that a person save 10% to 15% of their pre-tax income per year during their working years.
A person earning $50,000 per year, for example, would save anywhere from $5,000 to $7,500 for that year. Saving 10% of one’s income starting at the age of 25 can result in a $1 million nest egg by the time one retires.
The Rule of 80%
Another widely accepted rule states that an income of 70% to 80% of a worker’s pre-retirement income can be sufficient to maintain a retiree’s standard of living after retirement.
For example, if a person earned approximately $100,000 per year on average during his working life, he or she can maintain a similar standard of living after retirement with an income of $70,000 – $80,000 per year. This figure of 70% to 80% can vary greatly depending on how people envision their retirements. Some retirees want to sail around the world on a yacht, while others prefer to live in a simple cabin in the woods.
Common Sources of Retirement Funds
After retirement, most people in the United States rely on the following sources for financial support.
Social Security is a government-run social insurance program that provides protection against poverty, old age, and disability.
People in the United States who have contributed to the Federal Insurance Contributions Act (FICA) tax through payroll withholdings will receive some of their income in the form of Social Security benefits when they retire.
In the United States, Social Security was designed to replace roughly 40% of a person’s working income. Despite this, roughly one-third of the working population and half of retirees expect Social Security to be their primary source of income after retirement.
Future Social Security benefits are only loosely based on past income levels. A person earning $20,000 per year, for example, would receive approximately $800 per month in benefits.
A person earning $100,000 per year would receive approximately $2,000 in benefits per month. As can be seen, while a person earning more receives more benefits as their income rises, the increase is not proportional. This means that lower-income earners have more to gain from their initial Social Security contributions than higher-income earners.
Roth IRA and IRA
Traditional IRA (Individual Retirement Account) and Roth IRA (Individual Retirement Account) are also popular forms of retirement savings in the United States. There are similar programs to 401(k) and other employer matching programs.
Traditional IRA (Individual Retirement Account) and Roth IRA (Individual Retirement Account) are also popular forms of retirement savings in the United States.
There are specific tax shields in place that make them both appealing, just like 401(k)s and other employer matching programs. The main distinction between traditional and Roth IRAs is how taxation is applied.
Contributions to the former are made pre-tax (typically from gross pay, similar to 401(k)s), but are taxed upon withdrawal. Roth IRA contributions, on the other hand, are made with after-tax dollars and are not taxed when withdrawn during retirement.
Employers pool and manage retirement funds for their employees until they retire through pension plans. In the United States, most public employees are covered by pension plans rather than Social Security.
Some private employers may also offer pension plans. Upon retirement, each employee has the option of receiving fixed payouts from their pension pot or selling it as a lump sum to an insurance company. They can then choose to receive an annuity as income.
Pension plans were once a popular way to save for retirement in the United States, but they have since fallen out of favor, owing largely to increased longevity; there are fewer workers for every retired person.
They can, however, be found in the public sector or traditional corporations.
CDs and investments
While pensions, 401(k)s, and IRAs are excellent ways to save for retirement in the United States due to their tax advantages, they all have annual investment limits that can vary depending on income or other factors.
In general, investments are used to grow wealth, but people who have exhausted their tax-advantaged retirement plans and are looking for new places to put their retirement funds can also use investments to achieve their retirement goals.
Mutual funds, index funds, individual stocks, real estate properties, bonds, commodities such as gold, and Certificates of Deposit are examples of common investments in the United States (CDs).
While these are some of the most popular, there is a much longer list of potential investments for growing wealth for retirement.
Some funds provide a relatively consistent rate of growth over time, whereas individual stocks are more volatile. Gold and other commodities, as well as real estate, tend to fluctuate in response to economic conditions. CDs and fixed income investments have low returns in comparison, but they are good options for those who want low-risk, consistent income and are nearing or in retirement.
Every investment has a different level of risk and reward, and it is up to the individual to determine what is best for them.
These same investments will most likely be used in the portfolios of the tax-advantaged retirement accounts listed above, with the addition of the tax benefits.
Personal savings, such as checking, savings, or money market accounts, may appear to be the most obvious way to save for retirement; after all, it is the first place where most people’s surplus disposable income accumulates before it is spent.
However, due to inflation, it may not be the best long-term method of saving for retirement.
Personal savings such as cash, checking accounts, savings accounts, or other forms of liquid assets typically offer little or no interest in the United States.
When income taxes are factored in, the returns rarely outperform inflation.
That is not to say that there aren’t some advantages to having some savings on hand in case of an emergency.
If not used, emergency funds are an important part of a healthy personal finance plan and can eventually be contributed to a retirement fund.
Other Retirement Income Sources
- Real Estate and Home Equity
- Passive Income
Retirement Calculator and Pension-Retirement Pension Calculator
This free pension calculator assists in calculating the amount that both the employee and the employer must contribute to a retirement pension scheme in the employee’s favor.
Employees are expected to contribute 8% of their basic salary, housing allowance, and transportation allowance, according to the Nigeria Pension Commission.
The employer, on the other hand, is required to contribute a minimum of 10% of the same amount.
It is important to note that the employee contribution is tax-free.
While access to the fund is not permitted until retirement, there are legitimate reasons for withdrawals from the retirement savings account prior to retirement. One of these reasons is being out of work for four months.
Retirement calculator and inflation
In order to calculate how much you need to retire, you must also account for inflation. Prices rise over time, reducing the purchasing power (value) of your money.
This means that the money you save today will most likely not go as far in 20 to 30 years.
This retirement calculator was designed with inflation in mind. It includes an assumed 3 percent inflation rate, so you can see how much you need to save.
Best retirement calculator
- MaxiFi Basic Retirement Calculator
- New Retirement Online Tool
- AARP Retirement Income Calculator
- MarketWatch’s Retirement Calculator
- T. Rowe Price Retirement Income Calculator
- Schwab Retirement Savings Calculator
- Vanguard Retirement Income Calculator
- Bankrate Retirement Calculator
- Fidelity Retirement Calculator
Other retirement calculator includes:
- Dave Ramsey retirement calculator
- 401k Retirement Calculator
- Realistic retirement calculator
- Nerdwallet retirement calculator
401k Retirement Calculator
A 401(k) plan can be one of your most effective tools for securing your retirement. It offers you two significant advantages. To begin, all contributions and earnings to your 401(k) are tax deductible.
You only pay taxes on contributions and earnings when you withdraw the money. Second, many employers match your contributions to your 401(k) account, which can range from 0% to 100% of your contributions.
The end result is a retirement savings plan you can’t afford to ignore.
Retirement calculator with Social Security
Based on your earnings history and age, the calculator estimates your Social Security benefits.
The retirement calculator also shows you how much of your daily expenses your payments can cover and how you can increase your benefits by waiting to collect.
It can also tell you how working after you claim your Social Security benefit will affect your retirement earnings.
How does the calculator calculate the amount of my retirement benefits?
Our simplified estimate is based on two key pieces of information: your age and average earnings.
Your monthly retirement benefit is calculated using your highest 35 years of earnings. The Social Security Administration can provide you with your earnings history (SSA).
Your Social Security benefit is also determined by your age at the time you apply.
You can begin collecting at the minimum retirement age of 62, but you’ll receive a larger monthly payment if you wait until full retirement age, which is currently 66 but is gradually increasing to 67 for people born in 1960 or later.
If you can wait until you are 70 to begin collecting, you will receive the maximum monthly benefit.
Retirement calculator for couples
If you have two working spouses in your household, use this calculator to help you create a retirement plan.
View your retirement savings balance as well as your withdrawals for each year until you retire.
By changing any of the following form fields, calculated values for displayed output values are immediately provided.
Simple retirement calculator and retirement planning calculator
A dependable retirement plan takes into account all aspects of your current and future financial life.
A dependable retirement plan is a fairly sophisticated living document that should evolve along with you and your objectives.
Simple retirement calculators are useful for quick estimates but not for accurate planning.
The simple calculations used in a retirement calculator are usually accurate. However, it is not tailored to your specific situation, values, resources, and goals.
And you don’t always know what assumptions are being used to perform the calculation or whether those assumptions are applicable to you and your situation.
You should probably not base any major decisions on a simple retirement calculator.
Retirement Withdrawal Calculator
The retirement planning equation has two parts: saving and spending.
The asset accumulation phase (saving) leads up to your retirement date, followed by the decumulation phase, in which you spend down your assets to support living expenses in retirement.
In reality, retirement income planning is one of the most complicated and contentious aspects of financial planning. There are numerous models, each with its own set of assumptions, portfolio assets, and risk tolerance.
Dividend growth stocks, for example, have the potential to provide inflation-adjusted income and capital growth, but they also carry increased volatility and the risk of permanent loss in the wrong market conditions.
A bond portfolio will provide consistent, dependable income, but the income and assets will lose purchasing power over time as a result of inflation.
Traditional fixed annuities (SPIA or single premium annuity) can provide a reliable income floor that you will never outlive, as well as a potentially higher safe withdrawal rate than bonds or stocks alone can provide, but the downside is a loss of liquidity and a potentially smaller estate for your heirs.
In short, there is no one-size-fits-all solution to retirement income planning.
Each strategy involves tradeoffs between risk and required income. No single retirement withdrawal calculator can effectively model all spending alternatives.
Military Retirement Calculators
There are various military retirement calculator and they include:
- BRS Calculator
- High-3 Calculator
- Final Pay Calculator
- REDUX Calculator
- RMC Calculator
- SCAADL Calculator
- Thrift Savings Plan Retirement Calculators
- Contribution Comparison Calculator
- TSP Payment and Annuity Calculator
- COLA (Cost of Living Adjustment)
Compound interest: Is the interest you earn on both your original deposit and the interest earned on that deposit. For example, a $1,000 investment earning 6% compounded annually could grow to approximately $4,300 in 25 years.
Contribution limits: Each year, the IRS establishes limits on the amount of money that can be contributed to 401(k)s and IRAs. These limits can vary from year to year.
Financial advisor: Is someone who helps people in managing their money.
Financial advisors can help clients with investments, retirement planning, and budgeting, among other things. A financial advisor can be a professional or a robo-advisor, which is a digital investment management service.
IRA: An individual retirement account is a tax-advantaged investment account individuals use for retirement savings.
Income: Money earned by working, investing, or providing goods or services.
Inflation: It occurs when the price of goods and services rises over time. As a result, purchasing power, or the value of money, falls.
Nest egg: It is a sum of money saved for the future, in this case, retirement.
Retirement age: The age at which you retire is entirely up to you.
Full Social Security benefits are currently available at the age of 66, but this will be raised to 67 for people born in 1960 or later. Early retirement benefits are available at the age of 62, but the monthly amount is lower.
Returns: The amount of money earned or lost on an investment.
Risk: The possibility that an investment will underperform or even lose money. A low-risk investment, in general, has a lower potential return.
The more risk you’re willing to take, the greater the potential upside — and the greater the possibility of losing your investment.
Short-term investment: This is an investment that can be converted to cash quickly, such as a money market account or a high-interest savings account, as opposed to stocks or bonds.
Tax advantages: When you receive tax advantages from an investment account. You can, for example, make 401(k) contributions from your paycheck before taxes are deducted.
You don’t have to pay taxes on your contributions or earnings until you withdraw them.
Other accounts, such as Roth IRAs, allow you to pay taxes on your contributions now and then withdraw the money tax-free in retirement.
FAQs on Retirement Calculator
How do I calculate my retirement?
Here’s a general rule of thumb to help you figure out how much money you’ll need when you retire: Divide your current annual expenditure by 25.
That is what your retirement savings must be in order for you to safely withdraw 4 percent of that amount each year to live on.
How much a month is a good retirement?
Based on your projected savings and retirement age, you could have around $1,300 per month in retirement. If you save this amount by the age of 67, you will be able to spend $2,550 per month in retirement to support your living expenses.
What Is a Good Retirement Income?
According to the AARP, a good retirement income is approximately 80% of your pre-tax income before leaving the workforce.
This is because you will no longer be paying income tax or other job-related expenses once you stop working.
What is the most accurate retirement calculator?
Two of the best tools are the Rowe Price Retirement Income Calculator and the MaxiFi Planner.
It is critical to remember that retirement calculators rely on accurate information and reasonable assumptions.
What are the benefits of simple retirement calculators?
Simple retirement calculators are useful for getting an estimate quickly. They’re also entertaining.
Planning your financial life with a simple tool, on the other hand, leaves you and your lifestyle to chance.