Figuring out how much to save for retirement is a tricky process. You need to calculate the age in which you plan on retiring, along with retirement goals and of course, your savings. Plug in your personal information, including your age, amount saved, current salary, savings rate and expected amount you will need for retirement living expenses into MyBankTracker's Retirement Calculator. Find out if you have enough to retire, and if you don't, start making adjustments to your finances now, so you can live the life you want in your golden years.
Will you have enough to retire?
Calculation Methodology: The calculator has two phases: (1) Accumulation - calculates savings growth with compound interest and annual contributions until retirement, accounting for salary growth; (2) Withdrawal - calculates if savings will last until expected death age, with expenses increasing by inflation. It automatically finds the minimum retirement age at which savings last until death.
How We Calculate Your Savings Goal
First, we determine what your income will be at the time you retire by growing your current income at an annual rate of 3.8% (the inflation rate of 2.3%, plus the salary growth rate of 1.5%). We then assume you can live comfortably off of 85% of your pre-retirement income. So if you earn $100,000 the year you retire, we estimate you will need $85,000 during the first year of retirement. For each subsequent year, we increase your income need by 2.3% to keep up with inflation.
The second step is to calculate the total savings you will need at the time you retire, in order to generate enough income for each year of retirement. To do this, we determine what it would cost to purchase a fixed income annuity, with inflation-adjusted payments, using a discount rate (or rate of return) of 6%. The cost to purchase this hypothetical annuity is your target savings goal.
How We Calculate the Amount You Will Save
To figure out how much you will save by the time you retire, we first estimate your future income by growing your current income at a rate of 3.8% (the inflation rate of 2.3%, plus the salary growth rate of 1.5%). Then, we determine what the sum of your annual contributions will be between now and retirement. We assume your current savings and future contributions are invested and will earn an average annual rate of return of 6%.
