Retirement Savings Goal Calculator - Plan Your Retirement

How the Retirement Savings Calculator Works

This calculator determines how much you need to save each month to reach your retirement goal, considering your current savings, time until retirement, and expected investment returns.

The calculation uses the future value of a series formula rearranged to solve for the monthly payment:

PMT = (FV - PV × (1 + r)^n) × (r / ((1 + r)^n - 1))

Where:

PMT = Monthly payment (what we're solving for)
FV = Future value (retirement goal amount)
PV = Present value (current savings)
r = Monthly interest rate (annual rate ÷ 12)
n = Total number of payments (years × 12)

This formula accounts for compound growth on both your existing savings and your future monthly contributions.

Setting Realistic Retirement Goals

Financial advisors often recommend aiming for a retirement nest egg that can provide 70-80% of your pre-retirement income. Common approaches include:

The 25x rule: Save 25 times your expected annual retirement expenses
Replacement ratio: 70-80% of your final working years' income
Based on expenses: Calculate your expected retirement expenses

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Frequently Asked Questions

What's a good retirement savings goal?

It depends on your lifestyle and expected expenses in retirement, but many financial advisors recommend aiming for 70-80% of your pre-retirement annual income multiplied by 20-30 years of retirement. For example, if you earn $100,000 annually before retirement, you might aim for $1.4-2.4 million saved.

Is 6% a realistic annual return?

Yes, 6% is a reasonable long-term estimate for a balanced investment portfolio. Historically, the stock market has returned about 7-10% annually before inflation, while bonds have returned 3-5%. A balanced portfolio might average 6-7%. Always adjust for your risk tolerance and remember that past performance doesn't guarantee future results.

Does this calculator include inflation?

No, this version doesn't explicitly adjust for inflation. The results are in today's dollars. For a more accurate projection, you could use a real rate of return (nominal return minus inflation rate) in your calculations. For example, if you expect a 7% nominal return and 2% inflation, use a 5% real return.

What if I can't save the recommended amount?

If the calculated monthly amount seems unaffordable, consider these strategies: 1) Start with what you can save and increase contributions over time, 2) Extend your retirement timeline if possible, 3) Look for ways to increase your income, 4) Adjust your retirement lifestyle expectations, or 5) Seek higher investment returns (with understanding of increased risk).

How does changing the expected return affect the results?

A higher expected return reduces the monthly savings needed because your money grows faster through compounding. However, higher returns typically come with higher risk. A lower expected return means you need to save more each month to reach your goal. Small changes in the return rate can significantly impact the required monthly savings over long time horizons.

Monthly Savings Needed