Using our retirement calculator can help you estimate how much you’ll need to save for retirement and if you’re on track. Here are some tips for using a retirement calculator effectively:
- Determine your retirement age and life expectancy. Most calculators ask for the age you plan to retire and your expected lifespan.
- Estimate your current retirement savings and annual contributions. Have this information ready, including amounts in 401(k), IRAs, etc.
- Project your desired annual retirement income. Think about what % of your current income you’ll need (e.g. 70-80%) to maintain your lifestyle.
- Input estimated investment returns. Use a reasonable rate like 5-7% for a diversified portfolio.
- Add in expected retirement income sources like Social Security, pension plans, etc. This reduces the amount you need to save.
- Factor in inflation by using the calculator’s inflation rate input, usually 2-3% per year.
- Some calculators estimate medical costs in retirement. Healthcare can be a major expense, so include it if possible.
- Run different scenarios modifying your retirement age, savings rate, investment returns to see the impact on your projected retirement savings balance.
- If you have a projected shortfall, the calculator can show how increasing contributions, retiring later or reducing expenses can help make up the gap.
The key is being realistic about expenses, returns, inflation and making deficit adjustments through higher savings or working longer if needed to reach your retirement goal.
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