This simple retirement calculator will help you quickly see if you are ready to retire. You can also use this retirement calculator to see how changes in your savings rate, retirement age, or investment return influence your ability to retire.
Although this retirement calculator is simple to use, it is a good tool for seeing if you are on track for meeting you retirement goals. All you need to do is input some basic information like current age, retirement age, and savings information and the calculator will show you how close you are with a simple percentage.
You can then use the calculator to see how changes in any part of your retirement plan affect you.
If you want to get more into the detail of how this simple retirement calculator works and play with the assumptions yourself simply click on the “Customize (optional)” button at the bottom. For further instructions on how to work the retirement calculator scroll down.
How to Use the Simple Retirement Calculator
To use the customize feature on the simple retirement calculator simply click the dropdown arrow to the right of customize. You’ll now see six separate fields for changing the calculator assumptions. There is also text at the bottom that says “Click to use Life Expectancy instead of Withdrawal Rate”. I’ll explain how to use each of these below.
Annual Salary Growth
Simply input an expected average salary growth. The default is set to 2% which is a typical cost of living adjustment.
Annual Inflation Rate
Inflation is an important component of retirement planning. Again, change this as you see fit based on your own expectation about the future rate of inflation. The default is 3%, and future values in the calculator account for it.
This is the nominal rate of return you expect to earn on average on your retirement investments. Typically, you hold these in a retirement account such as a 403(b), 401(k), or IRA. Your own asset allocation will largely determine the rate of return you earn.
Monthly Retirement Spending
This is the amount of money you plan to spend each month in retirement. The default is 80% of your pre-retirement income. This is a good starting point, however, this can vary from person.
Other Retirement Income
Here is where you put in any other retirement income you expect such as Social Security, a pension, or rental income.
Expected Withdrawal Rate
Once you retire you’ll have to decide how you want to withdraw your money. There is no single “correct” way. The most common practice is to withdraw a certain percentage of your account balance. The default rate in the simple retirement calculator is 4% based on the 4% rule of retirement income. The idea of the rule is that it is a safe withdrawal rate that will prevent you from running out of money.
If you decide to use the life expectancy method instead of a withdrawal rate then the calculator will determine the annual withdrawal that will deplete your savings from retirement until your expected final age. If you choose the life expectancy method notice that you’ll also need to select an investment return in retirement. This isn’t needed with the withdrawal rate method.