How to use the retirement calculator
The retirement calculator answers the four main questions of retirement planning, one per tab. Each tab shows the result in actual dollars and in today's money, so you can see what your savings will really buy.
- Amount needed: how much you need at retirement for the income you want, whether your current plan gets you there and how much more to save. A graph and a year-by-year table, which you can export as CSV or PDF, show your balance at every age.
- Savings plan: the monthly or yearly savings, or the lump sum today, that reach a target. Saving for $1,800,000 by 67, starting at 35 with $30,000, takes about $1,434 a month at a 6% return.
- Withdrawal: the monthly income your savings can pay until your life expectancy, either rising with inflation or a fixed amount.
- How long it lasts: how many years a balance lasts at a monthly withdrawal, and the amount that uses it up in a set time.
How much do you need to retire?
You need enough money that, invested until the end of your life expectancy, pays the income you want after you stop working. Most plans aim for 70% to 80% of your income before retirement, because some costs stop, such as saving for retirement, payroll taxes and commuting. Social Security, a pension or rent lowers what your own savings need to cover. A quick rule of thumb is 25 times the yearly income your savings have to pay, which is the 4% rule turned around.
How the calculator works
- Your income grows by the income increase each year until you retire; the income you need is a share of it.
- In retirement the income rises with inflation, so the savings must pay it for every year to the life expectancy.
- The money keeps earning the average return; after inflation it earns the return minus the inflation rate.
- Your savings grow at the average return, with the yearly savings added at the end of each year.
In formula form, the amount needed at retirement is the present value of a monthly income that rises with inflation: amount needed = monthly income × (1 − (1 + r)−n) ÷ ((1 + r)1/12 − 1), where r is the yearly return minus inflation and n is the number of years in retirement.
Retirement calculator example
At 35, with a $70,000 income rising 3% a year, retiring at 67 and planning to 85, you need 75% of the income you will have at 67: about $11,266 a month, or $4,375 in today's money. With a 6% return and 3% inflation that takes about $1.88 million at 67. Saving 10% of your income on top of $30,000 already saved grows to about $1.10 million, so you would need to save about $1,510 a month, or 18.69% of your income, to reach the target. These are the default inputs of the Amount needed tab.
How much should you have saved by age?
A widely used benchmark from Fidelity measures retirement savings as a multiple of your salary. It assumes you save about 15% of your income from your twenties and retire at 67. For a $70,000 salary:
| By age | Savings target | On a $70,000 salary |
|---|---|---|
| 30 | 1× your salary | $70,000 |
| 40 | 3× your salary | $210,000 |
| 50 | 6× your salary | $420,000 |
| 60 | 8× your salary | $560,000 |
| 67 | 10× your salary | $700,000 |
Benchmarks are only a starting point. Your own target depends on when you retire, the income you want and your other income, which is what the calculator works out.
How much should you save each month?
Saving 10% to 15% of your income, counting an employer match, is the usual guideline if you start in your twenties or early thirties. Waiting costs a lot, because the money has less time to compound: the $1,800,000 target from the Savings plan tab takes $1,434 a month from age 35, but $3,163 a month if you start at 45 with the same $30,000.
A 401(k) with an employer match is usually the best place to start: the 401(k) calculator shows your balance with the match and the IRS limits. Tax-free growth adds up too; compare the accounts in the Roth IRA calculator and the IRA calculator.
The 4% rule and safe withdrawals
The 4% rule says you can withdraw 4% of your savings in the first year of retirement and raise the amount with inflation each year, and the money has historically lasted about 30 years. With $1,000,000 that is $40,000 in the first year, about $3,333 a month. The Withdrawal tab works out the amount for your own return, inflation and length of retirement instead of a fixed 4%: with its default inputs the savings grow to $1.86 million at 67 and can pay about $11,093 a month, rising with inflation, until 85.
How long will your retirement savings last?
The money lasts until the withdrawals use up the balance and its returns. $600,000 earning 6% a year lasts about 30 years and 10 months with withdrawals of $3,500 a month. If the monthly return on the balance is at least what you take out, the money never runs out. From your seventies, the IRS makes you take a minimum amount from traditional IRAs and 401(k)s each year; the RMD calculator shows how much.
Retirement calculations in Excel
The same results come from three Excel functions, with the monthly rate written as (1 + yearly rate)1/12 − 1:
- Amount needed:
=PV((1+3%)^(1/12)-1, 216, -11266)returns about $1,884,795, using the return minus inflation. - Monthly savings:
=-PMT((1+6%)^(1/12)-1, 384, -30000, 1884793)returns about $1,510. - How long it lasts:
=NPER((1+6%)^(1/12)-1, -3500, 600000)returns 370.4 months.
Where retirement income comes from
- Social Security: a monthly benefit for life that rises with inflation. The Social Security calculator finds the best age to claim it.
- A pension: a monthly income from an employer. The pension calculator compares a lump sum with monthly payments.
- Your savings: a 401(k), IRAs and other investments. Enter them as current and future savings.
- An annuity: a lump sum turned into a regular income. The annuity payout calculator shows what it pays.
Enter Social Security, a pension and other income in the optional Other income after retirement field; the calculator then works out only what your own savings have to cover.
Ways to close a retirement savings gap
- Save more, especially enough to get the full employer match.
- Retire a few years later: you save for longer, the money grows for longer and it has to last fewer years.
- Delay Social Security: the benefit grows for each year you wait past full retirement age, up to 70.
- Lower the income you plan to need, for example by paying off the mortgage before you retire.
- Keep investment fees low: they compound over the decades just like the returns.