Retirement Calculator (2024)

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Retirement Calculator (1)

How much do you need to retire?

This calculator can help with planning the financial aspects of your retirement, such as providing an idea where you stand in terms of retirement savings, how much to save to reach your target, and what your retrievals will look like in retirement.

How can you save for retirement?

This calculation presents potential savings plans based on desired savings at retirement.

How much can you withdraw after retirement?

This calculation estimates the amount a person can withdraw every month in retirement.

How long can your money last?

This calculator estimates how long your savings can last at a given withdrawal rate.

Related401K Calculator | Roth IRA Calculator | Investment Calculator

What is Retirement?

To retire is to withdraw from active working life, and for most retirees, retirement lasts the rest of their lives.

Why Retire?

There are many factors at play that ultimately affect a person's decision to retire. Physical or mental health can affect a person's decision to retire; if a worker is not physically strong enough, succumbs to 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 try to find a new occupation that better accommodates their health. Also, stressors associated with an occupation can become too unbearable, leading to a decline in satisfaction with work. Age is also a factor that affects a person's decision to retire. Theoretically, retirement can happen during any normal working year. Some may choose to "semi-retire" by gradually decreasing their work hours as they approach retirement. Some announce retirement and enter it short-term, just to rejoin the workforce again. However, it generally occurs between the ages of 55 and 70.

One of the most important factors that affect a person's decision to retire is whether it is even financially possible in the first place. While it is somewhat possible to retire with nothing in savings and to rely solely on Social Security (which an unfortunately significant number of Americans in the U.S. do), it is generally a bad idea for most due to the sheer difference between a working income as opposed to the Social Security benefits. In the U.S., Social Security benefits are only designed to replace about 40% of the average worker's wages during retirement.

Retirement is an important consideration for everyone, and when not forced to retire due to various reasons such as illness or disability, most people choose to retire when they are ready and comfortable with the decision.

How Much to Save for Retirement

Naturally, the next question becomes: how much should a person save for retirement? Simply put, it's an extremely loaded question with very few definite answers. Similar to the answer to the question of whether to retire or not, it will depend on each person, and factors such as how much income will be needed, entitlement for Social Security retirement benefits, health and life expectancy, personal preferences regarding inheritances, and many other things.

Below are some general guidelines.

10% Rule

This rule suggests that a person save 10% to 15% of their pre-tax income per year during their working years. For instance, a person who makes $50,000 a year would put away anywhere from $5,000 to $7,500 for that year. Roughly speaking, by saving 10% starting at age 25, a $1 million nest egg by the time of retirement is possible.

80% Rule

Another popular rule suggests that an income of 70% to 80% of a worker's pre-retirement income can maintain a retiree's standard of living after retirement. For example, if a person made roughly $100,000 a year on average during his working life, this person can have a similar standard of living with $70,000 - $80,000 a year of income after retirement. This 70% - 80% figure can vary greatly depending on how people envision their retirements. Some retirees want to sail a yacht around the world, while others want to live in a simple cabin in the woods.

4% Rule

People who have a good estimate of how much they will require a year in retirement can divide this number by 4% to determine the nest egg required to enable their lifestyle. For instance, if a retiree estimates they need $100,000 a year, according to the 4% rule, the nest egg required is $100,000 / 4% = $2.5 million.

Some experts claim that savings of 15 to 25 times of a person's current annual income are enough to last them throughout their retirement. Of course, there are other ways to determine how much to save for retirement. The calculations here can be helpful, as can many other retirement calculators out there. It also can be helpful to speak with licensed professionals who help people plan their retirements.

Impact of Inflation on Retirement Savings

Inflation is the general increase in prices and a fall in the purchasing power of money over time. The average inflation rate in the United States for the past 30 years has been around 2.6% per year, which means that the purchasing power of one dollar now is not only less than one dollar 30 years ago but less than 50 cents! Inflation is one of the reasons why people tend to underestimate how much they need to save for retirement.

Although inflation does have an impact on retirement savings, it is unpredictable and mostly out of a person's control. As a result, people generally do not center their retirement planning or investments around inflation and instead focus mainly on achieving as large and steady a total return on investment as possible. For people interested in mitigating inflation, there are investments in the U.S. that are specifically designed to counter inflation called Treasury Inflation-Protected Securities (TIPs) and similar investments in other countries that go by different names. Also, gold and other commodities are traditionally favored as protection against inflation, as are dividend-paying stocks as opposed to short-term bonds.

Our Retirement Calculator can help by considering inflation in several calculations. Please visit the Inflation Calculator for more information about inflation or to do calculations involving inflation.

Common Sources of Retirement Funds

People in the U.S. generally rely on the following sources for financial support after retirement.

Social Security

Social Security is a social insurance program run by the government to provide protection against poverty, old age, and disability. People in the U.S. who have contributed to the Federal Insurance Contributions Act (FICA) tax as withholdings from payroll will receive some of their income in the form of Social Security benefits during retirement. In the U.S., Social Security was designed to replace approximately 40% of a person's working income. Yet, approximately one-third of the working population and 50% of retirees expect Social Security to be their major source of income after retirement.

Future proceeds from Social Security are only loosely based on past income levels. For example, a person earning $20,000 per year would receive approximately $800 per month in benefits. A person earning $100,000 per year would receive around $2,000 per month in benefits. As can be seen, while a person who earns more does receive more in benefits as their income increases, the increase in benefits is not proportional. What this translates to is that low income-earners have more to gain from their initial investments into Social Security relative to higher-income earners. For more information or to do calculations involving Social Security, please visit our Social Security Calculator.

Pensions, 401(k)s, Individual Retirement Accounts (IRA), and Other Savings Plans

401(k), 403(b), 457 Plan

In the U.S., two of the most popular ways to save for retirement include Employer Matching Programs such as the 401(k) and their offshoot, the 403(b) (nonprofit, religious organizations, school districts, governmental organizations). 401(k)s vary from company to company, but many employers offer a matching contribution up to a certain percentage of the gross income of the employee. For example, an employer may match up to 3% of an employee's contribution to their 401(k); if this employee earned $60,000, the employer would contribute a maximum of $1,800 to the employee's 401(k) that year. Only 6% of companies that offer 401(k)s don't make some sort of employer contribution. It is generally recommended to at least contribute the maximum amount that an employer will match.

Employer matching program contributions are made using pre-tax dollars. Funds are essentially allowed to grow tax-free until distributed. Only distributions are taxed as ordinary income in retirement, during which retirees most likely fall within a lower tax bracket. Please visit our 401K Calculator for more information about 401(k)s.

IRA and Roth IRA

In the U.S., the traditional IRA (Individual Retirement Account) and Roth IRA are also popular forms of retirement savings. Just like 401(k)s and other employer matching programs, there are specific tax shields in place that make them both appealing. The big difference between traditional IRAs and Roth IRAs is when taxation is applied. The former's contributions go in pre-tax (usually taken from gross pay, very similar to 401(k)s) but are taxed upon withdrawal. In contrast, Roth IRA contributions are deposited using after-tax dollars and are not taxed when withdrawn during retirement. For more information about traditional IRAs or Roth IRAs, please visit our IRA Calculator or Roth IRA Calculator.

Pension Plans

Pension plans are retirement funds that employers pool together and manage for their employees until they retire. Most public servants in the United States are covered by pension programs rather than Social Security. Some private employers may also provide pension benefits. Upon retirement, each employee can then choose to have fixed payouts from their share of the pension pot or sell them as a lump sum to an insurance company. They can then choose to receive income in the form of an annuity.

In the U.S., pension plans were a popular form of saving for retirement in the past, but they have since fallen out of favor, largely due to increasing longevity; there are fewer workers for each retired person. However, they can still be found in the public sector or traditional corporations.

For more information about or to do calculations involving pensions, please visit the Pension Calculator.

Investments and CDs

In the U.S., while pensions, 401(k)s, and IRAs are great ways to save for retirement due to their tax benefits, they all have annual investment limits that can vary based on income or other factors. In general, investments are used as a method to grow wealth, but people who have maxed out their tax-advantaged retirement plans and are searching for other places to put retirement funds can also use investments in order to reach their retirement goals.

Examples of typical investments in the U.S. include mutual funds, index funds, individual stocks, real estate properties, bonds, commodities such as gold, and Certificates of Deposit (CDs). While these are some of the most popular, the list of potential investments as a way to grow wealth for retirement is much, much longer.

Some funds offer a relatively steady rate of growth over time, while individual stocks tend to be volatile. Gold and other commodities tend to fluctuate depending on economic conditions, and so does real estate. Comparatively, CDs and fixed income investments have low returns but make good options for those who seek low-risk, steady income, and are approaching or in retirement. All investments have different levels of risk and reward, and it is up to each individual to decide what is best for them. Tax-advantaged retirement accounts listed above will most likely use these same investments in their portfolios, with the addition of the tax benefits.

For more information or to do calculations involving investments, please visit the Investment Calculator.

Personal Savings

What may seem like the most obvious way to save for retirement is through personal savings such as checking, savings, or money market accounts; after all, it is the first place where surplus disposable income accumulates for most people before something is done with it. However, it may not exactly be the best method to save for retirement over the long term, mainly due to inflation. In the U.S., personal savings such as cash, checking accounts, savings accounts, or other forms of liquid assets normally offer little or no interest. With income tax accounted for, the returns rarely beat inflation.

That's not to say that there aren't certain benefits to having some savings in a readily available form in the case of an emergency. Emergency funds are an important part of healthy personal finance arrangements that can eventually be contributed to a retirement fund if not used.

Other Sources of Retirement Income

Home Equity and Real Estate

For some people in certain scenarios, preexisting mortgages and ownership of real estate can be liquidated for disposable income during retirement through a reverse mortgage. A reverse mortgage is just as it is aptly named — a reversing of a mortgage where at the end (the last amortized payment has been released), ownership of the house is transferred to whoever bought the reverse mortgage. In other words, retirees are paid to live in their homes until a fixed point in the future, where ownership of the home is finally transferred.

Annuities

A common way to receive income in retirement is through the use of an annuity, which is a fixed sum of periodic cash flows typically distributed for the rest of an annuitant's life. There are two types of annuities: immediate and deferred. Immediate annuities are upfront premiums paid which release payments from the principal starting as early as the next month. Deferred annuities are annuities with two phases. The first phase is the accumulation or deferral phase, during which a person contributes money to the account (or pays a premium). The second phase is the distribution, or annuitization phase, during which a person will receive periodic payments until death. For more information, it may be worth checking out our Annuity Calculator or Annuity Payout Calculator to determine whether annuities could be a viable option for your retirement.

Passive Income

Just because other investments don't have tax benefits doesn't mean they should automatically be ruled out. Passive income is one of them. During retirement, they can come in forms such as rental income, income from a business, stock dividends, or royalties. When 401(k) and IRA accounts have reached their contribution limits, passively-held investments offer another avenue where any remaining money can be placed. For more information on rental properties, please visit the Rental Property Calculator.

Inheritance

An inheritance is a portion of assets given to the heirs of the deceased, which an heir can use as income for retirement. However, because the estates of owners that die haven't exchanged hands since ownership, they may still be subject to tax, whether state or federal (In the U.S., along with the mandatory federal estate tax, six states mandate the payment of a separate inheritance tax). Also, the value of estates may change due to factors such as legal rights or financial volatility. Tangible assets such as real estate or jewelry may require the payment of capital gains tax if the assets are sold for profit. For more information about inheritances or to do calculations involving estate tax, please visit the Estate Tax Calculator.

Retirement Calculator (2024)

FAQs

What is the most accurate retirement calculator? ›

The T. Rowe Price Retirement Income Calculator and MaxiFi Planner are two of the best tools. It is important to keep in mind that retirement calculators rely on accurate information and realistic assumptions. In other words, if you put garbage in, you get garbage out.

How do you calculate enough for retirement? ›

The first step is to get an estimate of how much you will need to retire securely. One rule of thumb is that you'll need 70% of your annual pre-retirement income to live comfortably. That might be enough if you've paid off your mortgage and you're in excellent health when you retire.

What is the $1000 a month rule for retirement? ›

One example is the $1,000/month rule. Created by Wes Moss, a Certified Financial Planner, this strategy helps individuals visualize how much savings they should have in retirement. According to Moss, you should plan to have $240,000 saved for every $1,000 of disposable income in retirement.

How reliable are retirement calculators? ›

They Are Not Perfect

The first guideline I tried to impress on my class was that retirement calculators are not perfect. No matter how impressive they appear, they cannot predict the future and they will not give results that are perfectly accurate 20 years from now.

What is the average 401k balance for a 65 year old? ›

Average and median 401(k) balances by age
Age rangeAverage balanceMedian balance
35-44$76,354$28,318
45-54$142,069$48,301
55-64$207,874$71,168
65+$232,710$70,620
2 more rows
Mar 13, 2024

How much should a 72 year old have saved for retirement? ›

How Much Should a 70-Year-Old Have in Savings? Financial experts generally recommend saving anywhere from $1 million to $2 million for retirement. If you consider an average retirement savings of $426,000 for those in the 65 to 74-year-old range, the numbers obviously don't match up.

What is a good monthly retirement income? ›

Many retirees fall far short of that amount, but their savings may be supplemented with other forms of income. According to data from the BLS, average 2022 incomes after taxes were as follows for older households: 65-74 years: $63,187 per year or $5,266 per month. 75 and older: $47,928 per year or $3,994 per month.

How long will 200k last in retirement? ›

Summary. Retiring with $200,000 in savings will roughly equate to $15,000 annual income across 20 years.

What is the simple formula for retirement? ›

The Simple Math to Retirement Equation

With your annual expenses in hand, you can calculate how much you'll need in investments and be able to safely withdraw 4% per year. To do that, it's simply your annual expenses multiplied by 25. Why 25? It's the inverse of the 4% Rule.

Can you live on $3,000 a month in retirement? ›

That means that even if you're not one of those lucky few who have $1 million or more socked away, you can still retire well, so long as you keep your monthly budget under $3,000 a month.

Can I live on $2000 a month in retirement? ›

Retiring on a fixed income can seem daunting, but with some planning and commitment to a frugal lifestyle, it's possible to retire comfortably on $2,000 a month. This takes discipline but ultimately will allow you to have more freedom and happiness in your golden years without money worries.

How many years will $300 000 last in retirement? ›

$300,000 can last for roughly 26 years if your average monthly spend is around $1,600. Social Security benefits help bolster your retirement income and make retiring on $300k even more accessible. It's often recommended to have 10-12 times your current income in savings by the time you retire.

What is a realistic amount to retire on? ›

Financial planners often recommend replacing about 80% of your pre-retirement income to sustain the same lifestyle after you retire. This means that, if you earn $100,000 per year, you'd aim for at least $80,000 of income (in today's dollars) in retirement.

What is the most popular retirement age? ›

Right now, the average age for men to retire is 65 while the average age for women to retire is 63. While many people say they will work for as long as they can, others retire earlier than expected.

What is the 4 rule of thumb for retirement? ›

The 4% rule is a popular retirement withdrawal strategy that suggests retirees can safely withdraw the amount equal to 4% of their savings during the year they retire and then adjust for inflation each subsequent year for 30 years.

What is the best formula for retirement? ›

Many retirement experts recommend strategies such as saving 10 times your pre-retirement salary and planning on living on 80% of your pre-retirement annual income.

Is $600,000 enough to retire at 70? ›

Yes, it is possible to retire comfortably on $600k.

Is $500,000 enough to retire on at 62? ›

As we have established, retiring on $500k is entirely feasible. With the addition of Social Security benefits, this becomes even more of a possibility. In retirement, Social Security benefits can provide an additional $1,900 per month, on average. You can start receiving Social Security benefits as early as 62.

Is the NerdWallet retirement calculator accurate? ›

NerdWallet does not and cannot guarantee the accuracy or applicability of any information in regard to your individual circumstances. Examples are hypothetical, and we encourage you to seek personalized advice from qualified professionals regarding specific investment issues.

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