Retirement planning can be a complex process. But with a little help from a retirement calculator, it can be easier and less stressful.
This tool estimates your retirement income needs based on your current age and estimated taxes. It also adjusts for inflation.
How much do I need to save?
There are many factors that go into how much you need to save for retirement, such as when you plan to retire and your desired lifestyle. The exact amount you need to save is different for everyone, but financial experts generally recommend saving 25 times your annual expenses.
You should also consider other sources of income, such as Social Security or a pension from your current or former job. This will help you determine whether your savings are enough to cover your needs.
But a lot can change between now and when you want to retire. The market, for example, can go up or down, and you could lose a chunk of your savings in the process.
To get a better idea of how long $1 million in savings will last, GoBankingRates analyzed the cost of living in every state and how long $1 million would be enough to pay for your living expenses. It found that in less expensive states, $1 million in savings would be enough to sustain a comfortable life for about 25 years.
How long will my savings last?
. This calculator evaluates the longevity of your retirement savings and graphically illustrates over time when your funds will be depleted given a specific monthly income target you input.
One rule of thumb for retirement spending is to withdraw no more than 4% of your portfolio in the first year and adjust that amount each year for inflation. This rule of thumb is based on research that shows the order of market returns matters, and that you should withdraw a lower percentage of your portfolio in the first few years of retirement to minimize risk.
Another way to make sure your savings last is to set up automatic contributions to your retirement account after each paycheck. This can make putting money aside on a regular basis easy, and will reduce the temptation to spend it on things you don’t need.
How much will I need to live on?
The amount of money you will need to live on in retirement depends on your lifestyle, goals, and where you live. For example, a retiree who plans to visit Paris or a couple who wants to spend winters in Florida will have different retirement savings needs than a retired farmer who lives in rural Iowa.
To determine how much you will need to spend, start by estimating your current expenses and then subtract them from your projected future costs. This can help you figure out how much your current savings will need to grow to support your retirement lifestyle.
A common rule of thumb is to have 10-12 times your final working year’s salary saved by the time you retire. This will provide you with enough income to meet your retirement expenses without having to draw from your savings too early.
When you use this retirement calculator, be sure to include inflation. This is important because it decreases the purchasing power of your money over time, making it harder to save as much as you need today to achieve your retirement goals.
How much can I withdraw from my savings?
One of the most common questions people ask is how much they can safely withdraw from their savings each year. This answer is important because it helps determine whether or not you will have a financially secure retirement.
The safest withdrawal rate depends on your asset mix and how long you plan to retire. It can also vary depending on your age and life expectancy, and the prevailing market conditions at the time you enter retirement.
For example, a portfolio with more stocks may be more likely to grow over the long term, but it could also be more vulnerable to volatile price swings. Therefore, you might want to consider reducing your withdrawals during times of market volatility.
The 4% rule is a popular strategy for withdrawing from retirement accounts. This strategy limits annual withdrawals to 4% of your total savings, which is adjusted for inflation each year.