Chapter 10: Use a Retirement Calculator

It’s never too early to begin saving for retirement! Our retirement calculator makes it easy to set and keep tabs on your retirement savings goals.

In Chapter 10 of our retirement series, we’re covering how to use a retirement savings calculator and how it can help you figure out your retirement budget. Using a retirement calculator can help you with planning for success when it comes to retirement.

Fill in the calculator with your information and retirement expectations, and we’ll show you how much you need to save to make your retirement dreams a reality. You can test out several scenarios to see how your retirement rbudgesults change based on variables like your retirement contributions. Use this tool to monitor your savings progress and to ensure that you’re on track to retire with peace-of-mind.

• How to Use the Retirement Calculator
• Our Methodology: How Our Retirement Calculator Predicts Your Savings
• Benefits of Using a Retirement Calculator
• How Can I Improve My Retirement Savings Progress?
• Retirement Savings By Age
• Retirement FAQs
• Key Takeaways: Using a Retirement Savings Calculator
• Final Notes

So far in our retirement series, we’ve covered necessary topics like how much you need for retirement, how much you should save from your paycheck, the best ways to save for retirement, and the different types of retirement investment accounts, like 403b or 401k. It’s important that you have a solid understanding of these topics, so you should go back and reread the previous chapters if necessary.

Download our free mobile app

Available for iOS and Android

DownloadDownload

How to Use the Retirement Calculator

Our retirement savings calculator is easy to use, and provides straightforward results to help you maximize your saving efforts.

Here’s how to use it:

• Enter your current age

1. Enter your pre-tax income: Fill in this cell with your annual salary before taxes.
2. Enter your current savings: Input your current retirement savings. If you have not yet started saving for retirement, put zero (don’t worry, with our calculator you’ll soon be well on your way!).
3. Enter how much you save for retirement monthly: In this cell, indicate how much you regularly contribute to your retirement plan on a monthly basis. If you don’t already contribute to your retirement fund on a regular basis, enter the amount you plan to contribute moving forward.
4. Enter your planned monthly retirement spending: This can vary based on your expectations for retirement, but some financial experts recommend living on 80% of your current income. So, if you make $4,000 per month now, your planned retirement spending would be:
   $4,000 x 0.80 = $3,200
5. Fill in other expected income: In this cell, add the monthly total of any other expected income, such as pension or Social Security benefits. If you don’t know this amount or don’t want to count on this income, put $0.

• Add the age at which you hope to retire: The average age of retirement is 62. If you plan on working longer, you’ll have more time to save. If you plan on retiring younger, you may decide to contribute more to your retirement savings each month.

• Fill in life expectancy: Thanks to the advancement of new technologies and better healthcare, we’re living longer lives. In this cell, enter life expectancy – and plan for a long retirement!

• Add anticipated investment rate of return: Our calculator assumes a 5% rate of return on investment. This is a conservative estimate based on historical financial data.

• Inflation: Our calculator assumes an inflation rate of 2.5%. Inflation is a sustained increase in the general price level of goods and services in an economy over time.

Our Methodology: How Our Retirement Calculator Predicts Your Savings

Our retirement savings calculator predicts your total retirement savings in today’s amount, then highlights how that amount might expand over the years you plan to spend in retirement, with inflation taken into consideration.

Our default assumptions include:

• A 2.5% inflation rate
• A 5% rate of return before retirement
• Retirement spending of ~80% of your current income

Adjust the settings within the calculator to accurately reflect your current retirement money situation.

Benefits of Using a Retirement Calculator

There are many benefits of using financial calculators when figuring out how to save for retirement:

• Easy to use: A simple retirement calculator is a quick and easy way to estimate how much you need to save for retirement rather than having to do all the math yourself. With a retirement fund calculator, all you have to do is input your age, pretax income, current savings, and how much you save every month. The calculator will then do the work for you and estimate how much you need to retire by a certain age.
• Free: You can access our retirement calculator through our website. You can access the site anytime, from any place, so you can always stay on top of your finances.
• You can track your progress: A retirement calculator can give you an idea of how on track you are to your retirement goals. It’s important to track your savings progress so you can figure out ways to save more if necessary.

How Can I Improve My Retirement Savings Progress?

If your retirement savings progress isn’t quite where you’d like it to be, there are plenty of ways you can get back on track. Here are some tips to boost your retirement savings efforts:

• Get started today: If you’ve been waiting to begin saving for retirement, there’s no time like the present. It’s never too early or too late to begin saving; if you are just starting out, focus on saving as much as possible now. It’s important to start investing and saving as soon as possible so you can let compound interest work in your favor in the long run.
• Contribute to your 401k: If your employer offers a 401k plan, consider contributing pre-tax money with every paycheck. Some employers even offer contribution matching; try to meet or exceed their matching amount to make the most of your retirement savings.

As of 2022, the 401k contribution limit for those aged 50 and below is $20,500. The contribution limit for those 50 and older is $27,000, which includes the catch-up contribution limit of $6,500.

• Open an IRA: You might also consider opening an individual retirement account (IRA) to further build your savings. There are two options:
  • Roth IRA: These are after-tax contributions, so once you turn 59½, you can withdraw your distributions tax-free.
  • Traditional IRA: These are pre-tax contributions, and may come with tax deductions.Upon withdrawal this money is taxed as ordinary income.

As of 2022, the IRA contribution limit for those aged 50 and below is $6,000. The contribution limit for those 50 and older is $7,000, which includes the catch-up contribution limit of $1,000.

• Increase your contribution rate: Within our retirement calculator, experiment with different contribution rates to see how much even a single percentage change can increase your lifetime retirement savings.

Retirement Savings By Age

It’s important to be on track with your retirement savings, whether you have a 401k or IRA. You should be aware of the average 401k balance by age so that you can see how you compare and can improve your balance if necessary.

If you’re wondering how much you should have saved for retirement at a given age, there are several formulas you might consider:

1. 15/25/50 Formula

Fidelity Investments suggests that individuals have an amount equal to 1x their annual salary in accumulated savings by age 30. To successfully achieve this, they recommend the 15/25/50 rule: Save 15% of your salary, starting at age 25, with at least 50% of that amount being invested in stocks.

Based on that rule, you would need to have the following amounts saved at different ages:

• Age 40: Three times your annual salary
• Age 50: Six times your annual salary
• Age 60: Eight times your annual salary
• Age 67: 10 times your annual salary

2. Save 25% of Gross Salary Annually

This goal is a bit more aggressive, but certainly doable for those who begin saving for retirement early in their 20s.

If you follow this formula, you should be able to accumulate a full year’s salary in savings by the time you are 30. Based on this math, you would have the following amounts saved at different ages:

• Age 35: Two times your annual salary
• Age 40: Three times your annual salary
• Age 45: Four times your annual salary
• Age 50: Five times your annual salary
• Age 55: Six times your annual salary
• Age 60: Seven times your annual salary
• Age 65: Eight times your annual salary

As you can see, there are many formulas by which you can plan your retirement amounts, particularly as it relates to certain ages. Consider what is most feasible for your current salary and budget, and adjust accordingly.

Understanding your savings rate is important when it comes to planning for retirement. Your savings rate is essentially how much money you save each month as a percentage of your gross income. You want to aim to have a high savings rate because that means you’re saving more money on a monthly basis.

Retirement FAQs

How much do I need to save for retirement?

There’s no single right answer to this question, but rules of thumb can help you tailor your retirement goals. Our calculator can help you determine if you’re on track to retire with enough savings based on your individual goals.

How do I create a budget for retirement?

The time to invest in your retirement is now. If you want to find extra money in your budget to funnel into retirement accounts, Mint can help. With Mint, you can:

• Track your spending
• Receive personalized money insights
• Discover ways to bolster your retirement savings account

You can also use a budget template to create your retirement budget. You just have to subtract your living expenses from your take-home pay and if you have anything leftover, you can put that towards savings or leisurely expenses. Your retirement budget will vary depending on where you’ll retire and what your lifestyle will be like, but it’s still helpful to have a general idea of how much you’re expected to spend.

Every penny saved could translate to increased retirement savings, and our retirement calculator is the first step in building the retirement you’ve always dreamed of. Learn more about how to create a budget for retirement in Chapter 3 of this series and make the most of your post-work life.

How much progress have you made on retirement savings?

Regardless of your planned spending habits in retirement, you’ll want to have a nest egg stored away by the time you leave the working world. If your savings aren’t yet substantial, or you’re just getting started on your retirement savings goals, there’s no time like the present to examine your efforts and readjust your strategies.

Retirement should be a time when the stresses of the working world drift away. Unfortunately, without appropriate planning and savings strategies, you may be left wanting. In a recent Schwab study, participants were asked how much they felt they would need to retire comfortably. The answer: $1.7 million.

While $1.7 million might sound like a hefty amount to sock away, many retirees may find they actually need even more than that to live comfortably. That’s why it’s important to begin saving early and to prioritize your retirement accounts—a little effort now will go a long way when your Golden Years arrive.

Key Takeaways: Using a Retirement Savings Calculator

• Our retirement savings calculator is easy to use, and provides straightforward results.
• Our retirement savings calculator estimates your total retirement savings in today’s amount, then highlights how that amount might expand over the years you plan to spend in retirement.
• You can improve your retirement savings progress by
  • Starting to save as soon as possible
  • Contributing to your 401k
  • Opening an IRA
  • Increasing your contribution rate
• There are several formulas to calculate your retirement savings by age: 12/25/50 formula or save 25% percent of gross salary annually.

Final Notes

The promise of post-work life conjures images of sandy beaches, time spent exploring your passions, and days spent with the ones you love. While these retirement projections are fun to ponder, it’s also essential that you begin laying the financial groundwork for your dream retirement.

Using our retirement savings calculator, you can create a plan to financially prepare for the retirement you’ve always dreamed of, and improve your retirement outlook far in advance–and maybe even retire early.

With a tool like our retirement calculator under your belt, you’re ready to move on to Chapter 11, which will cover retiring early.

Source: Fidelity Investments | IRS 1, 2 | Schwab Retirement Plan Services

This is for informational purposes only and should not be construed as legal, investment, credit repair, debt management, or tax advice. You should seek the assistance of a professional for tax and investment advice.

Third-party links are provided as a convenience and for informational purposes only. Intuit accepts no responsibility for the accuracy, legality, or content on these sites.