This retirement calculator is a tool that will help you establish how much money you need to save each month to receive a decent retirement. It will also calculate what your monthly retirement income will be. If you ever wondered how much to save for retirement every month, or how many more years you need to work, this calculator is going to help you. If you want more detailed tools on retirement plans, check out the 401k, 403b, or TSP retirement calculators.
Why save for retirement?
There are many reasons that people avoid saving for retirement. Many people in their 20's think that retirement is an abstract concept that will only come to them after 40 or 50 years. In fact, the earlier you begin to think about it, the more comfortable your savings plan will be. Here are the top reasons to start saving:
- Don't rely on social security. Even if the estimate says that you will have a substantial retirement fund, remember that it can change (even multiple times) during your life. Additionally, you have no guarantee that the social security benefits will never be cut.
- You won't have to rely on your children. You probably aren't looking forward to being totally financially dependent on others. If you don't create a savings fund, it may turn out that the only way you will be able to make it through is living with your children because you can't afford your own flat.
- Every penny you save early will be worth many times more at the moment you retire. For instance, if you save $100 with a 5% yearly interest at the age of 25, it will be worth over $735 when you're 65 (not taking inflation into account).
- You can get tax deductions. There are special accounts dedicated to retirement funds that make savings tax-deductible.
How to use our retirement income calculator
You will need to input quite a lot of information into our retirement savings calculator to get the most out of it. If you leave one of the boxes blank and input everything else, we will calculate that one remaining field. For clarity, we split the calculator into four sections.
The first section contains information about you and helps us make more relevant calculations. The fields are as follows:
- Gender - select your gender. This is needed because gender impacts life expectancy.
- Current age - your age at the moment you began saving for retirement.
- Country - select your country, as it also influences life expectancy.
- Retirement age - it can be the regular retirement age in your country, or the age at which you wish to retire.
- Life expectancy - your life expectancy. You can either choose your country from the list (the data is taken from World Population Review) or input the value yourself.
The next section is titled "Your savings". The variables here are:
- Savings amount - your monthly input into your personal savings account.
- Amount already saved - the account balance of your savings account prior to the moment you began to save for retirement.
- Investment rate - the yearly interest rate. Deduct the inflation rate from the nominal interest rate to obtain the real value of your savings.
- Total savings - the total amount of money you will save from today up until your retirement day.
The "Your retirement money" sections covers the money you will get when you retire:
- Government pension or social security - the monthly income that you'll receive from social security of your country.
- Retirement income from savings - the monthly income that comes from the money you saved earlier in your life.
- Total retirement income - your total monthly retirement income - from both social security and your savings.
Finally, you have a handy comparison section:
- Cost of living - enter your average monthly spendings here.
- Budget percentage - this variable will show what percentage of your retirement income is your cost of living.
- Money left this field calculates the money that you have left after subtracting your cost of living from your total retirement income.
There is also a helpful graph that shows how your total retirement income changes based on the age you retire.
How much do I need to retire?
If you want to find out how much to save for retirement, you need to begin filling out the retirement calculator in a reverse order. Begin with the monthly retirement income you want to receive and the social security income you expect to get. Once you set your life expectancy and current age, the retirement calculator will find how much you need to retire. You can then find the monthly savings you need to make or set them to a fixed value to discover whether or not you will be able to retire early.