retirement calculator
For a working person, the golden years of retirement can be both easy and difficult to imagine. We may fantasize about international adventures or beach getaways, but rarely do we lay the groundwork to financially fulfill our retirement dreams. After all, there are more immediate concerns: work, children,mortgage paymentsand car payments, among other costs. Amid this daily grind, it's easy to put retirement savings on the back burner, especially with 15, 20, or 30 years to go. In fact, surveys have repeatedly shown that the average American's retirement savings are very low and that a significant number of Americans in their 30s, 40s, and even 50s have no retirement savings at all.
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Needless to say, the save nothing approach is not recommended. At its best, retirement is a time when the stresses of one to age 65 (or older) melt away, making room for relaxation, delight, and grandchildren. However, if money is tight, financial anxiety can crowd out these pleasures. Do you want to know how to retire comfortably?start saving.
On the other hand, just as it's not wise to save nothing, it's also not realistic to try to save every penny that isn't spent paying bills or buying groceries. For most retirees, there are other sources of retirement income besides savings, with Social Security being the main one. The common assumption is that some savings beyond Social Security and a less expensive lifestyle (no kids at home, no transportation costs) will contribute to financial security in our later years. In other words, it is common to assume that if we save in good faith, things will work out. For some, that may be true, but these success stories are more the result of good luck than good retirement strategy.
That phrase - soundretirement strategy- is where many of us lose interest. It is loaded with negative connotations: expensive investment advisers, large stacks of documents, and complex spreadsheets, to name a few. But a good retirement savings plan doesn't have to be complicated. It can be summed up in one simple question: how much do I need to save for retirement? By saving a percentage of your income every month from now until you retire, you can put an end to the financial anxieties many seniors face. A retirement calculator can help.
How much do I need to retire?
To figure out exactly what it takes to retire comfortably, it's important to consider what kind of lifestyle you expect to lead when you retire. Do you expect to travel? To Paris, or somewhere a little cheaper? How often do you want to eat out? Go to the movies? The beach? Do you want to move closer to the beach? The grandsons? These questions may seem trivial now, but they can help give you an idea of the income you'll need in the future. If you want to see the Eiffel Tower, the Giza Pyramids, and the Taj Mahal, you'll need a bignest of eggsdraw. On the other hand, if you expect to live a low-key lifestyle with far fewer expenses than you currently have, you won't need to save as much.
The important thing is to be realistic. Don't fool your future self by assuming you can live on canned tuna and scrambled eggs. While some costs are likely to decrease in retirement, others may increase. Specifically, health care costs are likely to increase in retirement. So it's better to have a cushion for unpredictable costs like that. Plus, retirement is your reward for decades of hard work—treat yourself accordingly.
Retirement Savings: Where Are You Now?
Whether you plan to live lavishly or frugally, you'll need to have a certain amount of money saved when you retire. Think of this figure as the top of a mountain, accessible from many different paths. If you've done everything right so far, that peak is still in sight; you have taken the most direct and least difficult path, and all you have to do is continue in the same direction. However, if your savings aren't where they should be, it's like you've walked in the wrong direction: you'll need to recalibrate and start climbing to get to the top.
To determine your current financial coordinates, you must answer three questions:
- How much have I saved so far?
- How many years until I retire?
- What is my annual income (and how much do I want to replace)?
The answers to these questions will determine how much work you will have to do to get to the top of the mountain. If you've saved a lot and you're still young, great, you're on the right track. If you haven't saved anything and your 60s are just around the corner, not so much. Let's look at some examples using our retirement calculator to see how this works in reality.
starting early
Let's start with the best-case scenario: You're 25 and have only worked a few years before you decide to get smart about your retirement. You live in a medium-sized city, say Tulsa, Oklahoma, where you make $45,000 a year. You currently have $5,000 in your savings account, and by saving $100 a month, you can put another $5,000 into your 401(k). Your employer has agreed to match 100% of your retirement savings account contributions, up to 5% of your total income.
After thinking about it, you decide that you would be comfortable living a similar lifestyle to your current one when you retire. assuming arate of returnabout 4% on your investments, you would need to save about $176 a month from now until you turn 67 to retire comfortably. Nothing bad! However, if you continue on your current path, you will be more than $260,000 short of yourretirement goalFor the moment.
Starting early to save for retirement can make a big difference in the long run. By saving an additional $76 per month, the 25-year-old in the example above can close the deficit of $265,261 projected by the SmartAsset retirement calculator.
wide bottoms
Let's try another. You just turned 40 and suddenly realize you're not focusing on your eventual retirement. Fortunately, she's managed to put away some solid savings over the years: She has $25,000 in the bank and another $12,000 stored in a traditional IRA. He now lives in Pittsburgh, where he earns $75,000 a year.
Now that he's older and wiser, he's a little more optimistic about his investments and therefore assumes a 5% annual return. He also plans to live modestly when he retires and thinks his budget will be a bit smaller than it is today. In that scenario, you'd only have to save about 7.5% of his income, or about $469 per month, from now until his 67th birthday—less than what he's already saving!
The Pittsburgh resident in the example above is well on her way to a happy retirement. SmartAsset's retirement calculator projects that she will have a savings surplus if she stays on her current course.
a little late
You are 54 years old and have saved sporadically throughout your career. In all, you have $50,000 in savings, most of it in your bank account, and because of your laissez faire attitude toward your investments, you don't expect to earn more than 4%. As a talent agent in Los Angeles, she is self-employed and has never bothered to open a retirement account. You make $100,000 and your spouse makes $70,000, for a total of $170,000 a year, and you've already agreed that you'll both keep working until you're 70.
When he retires, however, he'll be living in luxury: smoked salmon for breakfast, select cuts of meat for dinner. Bad news: To do all of that, you'll need to save $2,907 each month from now until you retire. That's about 20% of your monthly income. Compare that to the 5% per month you've saved so far. If you follow that course, you'll have a savings deficit of $660,000 when you retire.
Best plans
In the above scenarios, our hypothetical subjects kept their savings in one of severalretirement savings options, in a savings account, a 401(k) or a traditional IRA. There are many ways to invest the money you've set aside for retirement, depending on your goals. The rate of return your money earns depends on the risk you are willing to take, the success of your specific investment strategy, and to a certain extent, luck. For example, an economic downturn could hurt your investments, at least in the short term. The same can happen with changes in the inflation rate and other economic events.
All this to say: the unexpected can and does happen often. The best thing you can do is develop a solid plan based on the information you now have. Don't let retirement savings statistics get you down. A retirement calculator can help you see how you're doing so far and what you need to change to reach your retirement goals. By setting goals and sticking to them, you give yourself the opportunity for a rich and rewarding retirement.
FAQs
How much do you need to retire comfortably in 2022? ›
Financial planners often recommend replacing about 80% of your pre-retirement income to sustain the same lifestyle after you retire. This means that, if you earn $100,000 per year, you'd aim for at least $80,000 of income (in today's dollars) in retirement.
What is the most accurate retirement calculator? ›Rowe Price Retirement Income Calculator and MaxiFi Planner are two of the best tools. It is important to keep in mind that retirement calculators rely on accurate information and realistic assumptions.
How much money do you need to retire with $100000 a year income? ›Some experts recommend that you save at least 70 – 80% of your preretirement income. This means if you earned $100,000 year before retiring, you should plan on spending $70,000 – $80,000 a year in retirement.
How do I calculate my retirement needs? ›At age 30, some financial professionals suggest accumulating the equivalent of your current annual income. By age 40, you should have accumulated three times your current income for retirement. By retirement age, it should be 10-12 times your income at that time to be reasonably confident that you'll have enough funds.
What is the average 401k balance for a 65 year old? ›Many U.S. workers retire by the time they reach 65. Vanguard's data shows the average 401(k) balance for workers 65 and older to be $279,997, while the median balance is $87,725.
Can a couple retire at 65 with 500k? ›Yes, you can! The average monthly Social Security Income in 2021 is $1,543 per person. In the tables below, we'll use an annuity with a lifetime income rider coupled with SSI to give you a better idea of the income you could receive from $500,000 in savings.
What is the 80/20 rule for retirement? ›It directs individuals to put 20% of their monthly income into savings, whether that's a traditional savings account or a brokerage or retirement account, to ensure that there's enough set aside in the event of financial difficulty, and use the remaining 80% as expendable income.
What is the 7% rule for retirement? ›The best way to explain this rule is to use an example: Suppose you have $100,000, and you start withdrawing 7%, or $7,000, each year. The market goes down for several years, and your portfolio value is now at $82,000. The same $7,000 withdrawal is now 8.5% of your current portfolio value.
What is the 3 rule in retirement? ›Once you have an estimate of your annual retirement spending, you can begin to work out how much you need overall by multiplying your annual spending by the number of years you expect to spend in retirement, figuring in an extra 3% per year for inflation.
Can you retire $1.5 million comfortably? ›If a couple has $1.5 million in retirement funds, they can take out $60,000 per year. Added to their Social Security ($2,739 per month or $32,868 per year) and pensions, these sums can provide them with enough income to live comfortably.
What is a good annual income to retire on? ›
Average Retirement Income In 2021
According to U.S. Census Bureau data, the average retirement income for retirees 65 and older in the United States decreased from $48,866 in 2020 to $47,620 in 2021.
| Current Age | Current Salary | Estimated Benefit at 62 and 1 Month |
|---|---|---|
| 35 | $100,000 | $1,936 |
| 40 | $100,000 | $1,905 |
| 45 | $100,000 | $1,865 |
| 50 | $100,000 | $1,818 |
The rule works just like it sounds: Limit annual withdrawals from your retirement accounts to 4% of the total balance in any given year. This means that if you retire with $1 million saved, you'd take out $40,000 the first year. Even so, you'd also adjust this amount annually for inflation.
What is the 25 times rule for retirement? ›The first is the rule of 25: You should have 25 times your planned annual spending saved before you retire. That means that if you plan to spend $30,000 during your first year in retirement, you should have $750,000 invested when you walk away from your desk. $50,000? You need $1,250,000.
How much should a 55 year old have for retirement? ›Experts say to have at least seven times your salary saved at age 55. That means if you make $55,000 a year, you should have at least $385,000 saved for retirement.
What is a good 401k balance at age 60? ›By age 50, you should have six times your salary in an account. By age 60, you should have eight times your salary working for you. By age 67, your total savings total goal is 10 times the amount of your current annual salary. So, for example, if you're earning $75,000 per year, you should have $750,000 saved.
How much does the average American retire with? ›| Age range | Average Retirement Savings |
|---|---|
| Ages 18-24 | $4,745.25 |
| Ages 25-29 | $9,408.51 |
| Ages 30-34 | $21,731.92 |
| Ages 35-39 | $48,710.27 |
In fact, statistically, around 10% of retirees have $1 million or more in savings. The majority of retirees, however, have far less saved. If you're looking to be in the minority but aren't sure how to get started on that savings goal, consider working with a financial advisor.
How much should you have in the bank to retire at 65? ›Retirement experts have offered various rules of thumb about how much you need to save: somewhere near $1 million, 80% to 90% of your annual pre-retirement income, 12 times your pre-retirement salary.
Is a million dollars enough to retire on at 65? ›A recent study determined that a $1 million retirement nest egg will last about 19 years on average. Based on this, if you retire at age 65 and live until you turn 84, $1 million will be enough retirement savings for you.
How much money should a 65-year-old have to retire? ›
“Several experts on retirement have given various estimates about how much you need to save: close to $1 million, 80% to 90% of your yearly income before quitting work, and 12 times what you used to make annually.”
What is the 5/15 75 rule for retirement? ›Based on a withdrawal rate of 5% and the replacement ratio of 75% of annual salary, the amount that is required at retirement is 15 times your final annual salary. However, if the numbers were fail-safe and the process was risk-free, retirement would not be the complicated process it has become.
Does the 4% rule still work for retirees? ›4% rule about how much to spend each year of retirement no longer works, creator says. So if you have $1 million saved for retirement, you would spend $40,000 the first year, and if inflation is 2% the following year, you would take out $40,800 that year.
What is the 5% retirement rule? ›The sustainable withdrawal rate is the estimated percentage of savings you're able to withdraw each year throughout retirement without running out of money. As an estimate, aim to withdraw no more than 4% to 5% of your savings in the first year of retirement, then adjust that amount every year for inflation.
Which is the biggest expense for most retirees? ›Housing. Housing expenses—which include mortgage, rent, property tax, insurance, maintenance and repair costs—remained the largest expense for retirees. More specifically, the average retiree household pays an average of $17,454 per year ($1,455 per month) on housing costs, representing over 35% of annual expenditures.
How long will $3 million last in retirement? ›If you retire at age 65 and expect to live to the average life expectancy of 79 years, your three million would need to last for about 14 years.
Is 4 million enough to retire at 70? ›The simple answer is yes. You can retire with $4 million. However, it is essential to note that your lifestyle will significantly affect how long your money will last. For example, four million dollars may not be enough if you like to travel and live a luxurious lifestyle.
What is the 10 20 Rule retirement? ›While it's technically a rule of thumb as opposed to an enforceable decree, the 10/20 rule is a system of budgeting that can work for virtually anyone. The idea is to keep your total debt at or under 20% of your annual income, while maintaining monthly payments at no more than 10% of your monthly net income.
Does your retirement double every 7 years? ›When does money double every seven years? To use the Rule of 72 to figure out when your money will double itself, all you need to know is the annual rate of expected return. If this is 10%, then you'll divide 72 by 10 (the expected rate of return) to get 7.2 years.
How long will $4 million last in retirement? ›When will $4 million run out? Your savings will last for 12 years and 8 months.
At what age is a million dollars enough to retire? ›
Retire At Age 65 With $1 Million.
The following table estimates the guaranteed annual income a 65-year-old can retire with a $1 million annuity. This table does not include Social Security Benefits.
If you want a comfortable retirement, you should aim for a monthly income of at least 70% of your pre-retirement income. So, if you and your spouse currently bring in a combined monthly income of $5000, you would need to have a retirement income of at least $3500 per month. Of course, this is just a general guideline.
Can I retire at 62 with 1 million in 401k? ›One common rule of thumb is to withdraw 4% from retirement funds each year. Four percent of $1 million provides $40,000 each year for retirement spending. If you can't imagine living off $40,000 a year plus Social Security, it's time to reconsider your savings goal.
Can you retire on $3,000 a month? ›Whether you want to retire in a big city or a small town, you can live comfortably in some places for $3,000 a month or less.
What is the average Social Security check? ›Social Security offers a monthly benefit check to many kinds of recipients. As of October 2022, the average check is $1,550.48, according to the Social Security Administration – but that amount can differ drastically depending on the type of recipient. In fact, retirees typically make more than the overall average.
What does the average retiree live on per month? ›Average monthly expenditures for those 65 and older — including rent, groceries and healthcare — stand at around $4,345, according to the latest government data. In 2016, retirement-age Americans were getting away with spending nearly a thousand dollars less at $3,564.
What is the highest monthly Social Security payment? ›The maximum benefit depends on the age you retire. For example, if you retire at full retirement age in 2023, your maximum benefit would be $3,627. However, if you retire at age 62 in 2023, your maximum benefit would be $2,572. If you retire at age 70 in 2023, your maximum benefit would be $4,555.
Is it better to take Social Security at 62 or 67? ›You can start receiving your Social Security retirement benefits as early as age 62. However, you are entitled to full benefits when you reach your full retirement age. If you delay taking your benefits from your full retirement age up to age 70, your benefit amount will increase.
What is the highest Social Security amount you can earn? ›In 2022, if you're under full retirement age, the annual earnings limit is $19,560. If you will reach full retirement age in 2022, the limit on your earnings for the months before full retirement age is $51,960.
Do those who retire early live longer? ›Men responding to the early retirement offer were 2.6 percentage points less likely to die over the next five years than those who did not retire early. (Too few women met the early retirement eligibility criteria to be included in the study.) The Dutch study echoes those from other countries.
What is the rule of 88 for retirement? ›
An employee retiring at age 61 would receive 88 percent of the normal benefit [100 - (4 years x 3 percent)], while an employee retiring at age 56 would receive 65 percent of the normal benefit [100 - (5 years x 3 percent + 4 years x 5 percent)]. Reduction varies by service.
What is the best month to retire for tax purposes? ›But if you do have the choice, you might want to consider retiring around the end of March. Here's why: A lower rate of Income Tax. If you are a higher rate tax payer, then retiring part way through a tax year is likely to mean your pension income is taxed at 40% (because it's added on top of your salary).
What is the 59 1/2 Rule of retirement? ›In order to guarantee that the benefits of IRAs are used solely for retirement, the IRS imposes age limits on these accounts. Unless users are willing to incur a 10% penalty, IRA assets are not accessible until age 59 and a half.
What is the 85 rule for retirement? ›RULE OF 85 RETIREMENT is a special early retirement benefit without the usual reduction if a member's age plus creditable service at time of termination equals or exceeds 85. The pension is computed in the same manner as normal service retirement.
What is the 90 rule for retirement? ›It's actuarial jargon. The rule of 90 is a formula for determining when a teacher can draw a normal pension without penalty. This rule is satisfied when your age + years of service = 90.
What is the average 401K balance for a 55 year old? ›| AGE | AVERAGE 401K BALANCE | MEDIAN 401K BALANCE |
|---|---|---|
| 35-44 | $86,582 | $32,664 |
| 45-54 | $161,079 | $56,722 |
| 55-64 | $232,379 | $84,714 |
| 65+ | $255,151 | $82,297 |
The short answer is yes—$500,000 is sufficient for many retirees. The question is how that will work out for you. With an income source like Social Security, relatively low spending, and a bit of good luck, this is feasible.
How much does the average 70 year old have in savings? ›According to data from the Federal Reserve's most recent Survey of Consumer Finances, the average 65 to 74-year-old has a little over $426,000 saved. That's money that's specifically set aside in retirement accounts, including 401(k) plans and IRAs.
How much money does the average person need to retire comfortably? ›Use these insights to help determine whether your retirement plan is on the right track. Retirement experts have offered various rules of thumb about how much you need to save: somewhere near $1 million, 80% to 90% of your annual pre-retirement income, 12 times your pre-retirement salary.
What is a comfortable amount of money to retire with? ›“Several experts on retirement have given various estimates about how much you need to save: close to $1 million, 80% to 90% of your yearly income before quitting work, and 12 times what you used to make annually.”
What percentage of Americans have one million saved for retirement? ›
In fact, statistically, around 10% of retirees have $1 million or more in savings. The majority of retirees, however, have far less saved. If you're looking to be in the minority but aren't sure how to get started on that savings goal, consider working with a financial advisor.
What does the average American retire with? ›There are also signs that Americans may be increasing their retirement savings, as the average retirement savings increased by 13%: from $87,500 to $98,800, according to Northwestern Mutual's 2021 Planning & Progress Study.
How much do most people retire with? ›Average retirement savings of American households in 2022: $65,000. The median retirement savings for American households have grown every three years since 1989 with few exceptions. The figures below are based on the 2019 Survey of Consumer Finances, the most recent set of data available.
How long does $1 million last after retirement? ›A recent study determined that a $1 million retirement nest egg will last about 19 years on average. Based on this, if you retire at age 65 and live until you turn 84, $1 million will be enough retirement savings for you.
Is $1.5 million enough to retire at 65? ›Based on this data, if you stop working at age 65 and live until you're 85, you'll have enough money saved for retirement if you have $1.5 million as long as you can live on between 70,000 to 75,000 dollars every year.
Can I retire at 61 with 500k? ›The answer as to whether $500,000 is “enough” for you to retire at 60 might be completely different than someone else looking to do something similar. Generally speaking, you can retire at 60 with $500,000, but you may not like how much income you have or it may not be enough for your needs.
How old is the average American millionaire? ›Millionaire Statistics by Age
The world's 100 richest individuals earned their first $1 million at age 37, on average. The average millionaire is 57 years old.
Saving for Retirement
The Fidelity savings guidelines say a 40-year old should have a nest egg twice her annual income; by age 50, the egg should be four times income and at age 60, retirement savings should be six times current income.