🧮 Investment & Retirement Planner
Plan your financial future with inflation-adjusted projections and tax considerations
📊 How Retirement Planning Calculations Work
This calculator projects your retirement savings growth using compound interest formulas, adjusted for inflation and taxes to give you a realistic picture of your future purchasing power.
The formula used to calculate your future portfolio value is:
Where:
- FV = Future value of the investment
- P = Principal investment amount (current savings)
- PMT = Monthly contribution amount
- r = Annual interest rate (in decimal form)
- n = Number of compounding periods per year (12 for monthly)
- t = Time in years
The calculator then adjusts for:
- Taxes: Investment returns are reduced by your effective tax rate
- Inflation: The final value is expressed in today's dollars to show real purchasing power
The 4% rule estimate is based on the common retirement withdrawal strategy that suggests you can safely withdraw 4% of your portfolio annually in retirement without depleting your savings too quickly.
Remember that these are projections based on the inputs you provide. Actual results may vary based on market conditions, changes in tax laws, and unexpected life events.
Retirement calculators provide estimates based on the inputs you provide. They're excellent for illustrating the power of compound interest and helping you set savings goals, but they can't predict future market returns, inflation rates, or life events with 100% accuracy. It's best to use them as a guide and revisit your plan annually. Many financial advisors recommend adding a "safety margin" of 10-20% to your target retirement savings to account for uncertainty.
The 4% rule is a common retirement withdrawal strategy that suggests you can withdraw 4% of your retirement portfolio in the first year of retirement, then adjust that amount for inflation each subsequent year, with a high probability your savings will last 30 years. This rule was based on historical market data and a 60/40 stock/bond portfolio. Some experts now suggest a more conservative 3-3.5% withdrawal rate due to lower expected future returns and longer life expectancies.
Inflation significantly impacts retirement planning because it erodes the purchasing power of your savings over time. A 3% annual inflation rate will cut the value of your money in half in about 24 years. This calculator adjusts for inflation to show your projected portfolio value in today's dollars, giving you a more accurate picture of your future purchasing power. When planning for retirement, it's crucial to consider that your expenses will likely increase over time due to inflation, especially healthcare costs which typically rise faster than general inflation.
While the exact amount varies based on your desired lifestyle in retirement, a common rule of thumb is to aim for saving 15-20% of your pre-tax income throughout your working years. Many experts suggest targeting a retirement portfolio that is 25-30 times your expected annual expenses. For example, if you expect to need $50,000 per year in retirement, you might aim for a portfolio of $1.25-$1.5 million. This calculator helps you determine a more personalized target based on your specific circumstances.
The best time to start retirement planning is as early as possible, thanks to the power of compound interest. Even small contributions made in your 20s can grow significantly more than larger contributions made later in life. However, it's never too late to start. If you're getting a late start on retirement savings, you may need to save a higher percentage of your income or consider working a few years longer than originally planned. This calculator can help you create a plan regardless of when you're starting.