Retirement Calculator

1. How Much Do You Need to Retire?

This function helps you assess your current savings trajectory and determine what you need to save to reach your retirement goals. It requires inputs like your current age, planned retirement age, income, and savings rates to project your necessary nest egg.

2. How Much Can You Withdraw?

Once you are in retirement, this function estimates a sustainable monthly income stream. It takes into account your total retirement savings and assumptions about investment returns and inflation to provide a safe withdrawal amount.

3. How Long Can Your Money Last?

This calculator addresses the crucial concern of ensuring the longevity of your retirement funds. By inputting your savings and planned monthly withdrawal amount, it estimates how long your money will last, helping you avoid outliving your savings.

10% Rule (Saving Strategy)

This suggests saving **10% to 15% of pre-tax income per year** during working years. Saving 10% starting at age 25 could make a **\$1 million nest egg** possible by retirement.

80% Rule (Income Goal)

This popular rule suggests that an income of **70% to 80% of a worker's pre-retirement income** is typically enough to **maintain a retiree's standard of living**. However, this figure can vary greatly depending on personal retirement visions.

4% Rule (Nest Egg Calculation)

Retirees who have a good estimate of their required annual income can **divide this number by 4%** to determine the required nest egg. For example, needing \$100,000 a year requires a \$2.5 million nest egg.

Strategies to Mitigate Inflation

While inflation is largely unpredictable, investors can focus on achieving a large, steady return on investment. For those wanting to actively mitigate inflation, strategies include:

• **TIPS:** Investing in Treasury Inflation-Protected Securities.
• **Commodities:** Traditional hedges like gold and other commodities.
• **Stocks:** Favoring dividend-paying stocks over short-term bonds.

How This Calculator Helps

Our Retirement Calculator helps you account for inflation by including an **"Inflation rate/year"** input in its calculations, ensuring your financial projections are more realistic for the long term.

Social Security

A government program designed to replace about 40% of a worker's income. While a crucial piece of the puzzle, relying solely on it is generally not advisable due to the income gap between pre-retirement earnings and benefits.

Tax-Advantaged Accounts

• 401(k)s & Employer Matching: Contribute at least enough to get your full employer match. Contributions are pre-tax, grow tax-deferred, and are taxed on withdrawal.
• IRAs (Traditional & Roth): Traditional IRAs offer pre-tax contributions and tax-deferred growth. Roth IRAs use after-tax money, but withdrawals in retirement are tax-free.
• Pension Plans: Less common now, these employer-managed funds offer fixed payouts or a lump-sum option upon retirement, often found in public sector jobs.

General Investments and Assets

Once you've maxed out tax-advantaged plans, you can grow wealth through other investments, though without the same tax shields.

• Investments & CDs: Includes mutual funds, stocks, real estate, and bonds. For those near retirement, lower-risk options like CDs can provide steady income.
• Personal Savings: Best used for emergency funds rather than long-term retirement savings, as returns rarely outpace inflation.
• Passive Income: Rental income, stock dividends, or royalties can supplement retirement funds. For more detailed investment projections, you can use our Investment Growth Calculator.
• Home Equity: A reverse mortgage can allow retirees to receive payments while living in their home.
• Inheritance: Can provide additional funds, but be mindful of potential estate or inheritance taxes.

Defining Retirement

Retirement is the withdrawal from one's active working life, a phase that for most people lasts the rest of their lives. While it can happen at any time, it generally occurs between the ages of 55 and 70. Some individuals may choose to "semi-retire" by gradually reducing work hours, while others might re-enter the workforce after a period of retirement.

Factors Influencing Retirement

The decision to retire is influenced by a combination of health, personal satisfaction, and financial readiness.

• Health & Personal Factors: Declining physical or mental health, unbearable job-related stress, or simply the desire for a change can all be compelling reasons to retire. Ultimately, most people choose to retire when they are comfortable with the decision.
• Financial Possibility: This is one of the most critical factors. A secure retirement depends on whether it is financially viable. Relying solely on Social Security is risky, as it typically replaces only about 40% of a worker's pre-retirement income.