new ways to calculate
new ways to calculate
Adjust the orange knobs to explore how much you want to contribute towards retirement.
What is included in the calculation?
The calculator assumes that you contribute a constant amount each year to your retirement savings (starting at "Current Age") and then withdraw a constant amount each year starting at "Retire" age. The calculation includes the interest you receive each year at the interest rate specified; and any additional "pension" amount you expect to receive starting at "Retire" age.
The simulation does not attempt to calculate or predict medical costs, inflation, taxes, or any other costs, benefits, or risks. Interest is compounded yearly.
What interest rate is appropriate?
Use an interest rate that is adjusted for inflation. That way, all dollar amounts shown can be valued in today's dollars.
If your retirement savings are invested in the stock market, performance may vary widely. Historically, after adjusting for inflation and dividends, in some decades the stock market had negative returns while other decades it returned as high as 16% per year [citation]. Longer time frames have been somewhat more stable. From 1871 to 2011, all 30-year periods of the stock market have returned at least 3.2% annualized interest. The average annualized 30-year return was 6.6%. [citation]
How can I account for taxes?
Contribution amounts are simply what goes into your retirement account, and withdraw amounts are what comes out. So withdraw amounts are comparable to a salary, before any taxes are paid.
If you want to be able to spend $60,000 per year in retirement and you expect your distributions to be taxed at 15%, then configure the retirement calculator to withdraw 15% extra ($60,000 / (1 - 0.15) = $70,600).
What is my pension amount?
The pension amount is what you expect to receive from pension plans or government programs — any income beyond what you'll earn from your retirement savings accounts.
For example, in the U.S. the average Social Security retirement benefit in 2019 was about $1500 per month. [citation]
Why are the dollar amounts approximate?
The retirement calculator uses full precision internally, but it rounds all displayed values for clarity and because there are so many uncertainties in retirement planning.
For example, increasing the interest rate by a mere 0.1% can lead to a 5% increase in your retirement earnings. Interest rates in the past have varied far more than that, so predicting retirement savings down to the penny (or even to the thousands of dollars) is meaningless.
Where can I learn more?
For more information about investing and market histories, check out the articles and calculators at Moneychimp.
You can also try out the original retirement calculator (released in May 2012), which offers a slightly different perspective on retirement savings and is not optimized for smartphones.