1. Current age
Your current age.
2. Planned retirement age
The age you plan to retire. You can choose to retire at any age. For those born after 1960, 67 is the full retirement age, when you will receive your full Social Security benefits.
3. Current savings
This is the total amount you currently have in all your retirement savings accounts, including 401(k)s, individual retirement plans (IRAs), annuities, and any other retirement accounts.
4. Monthly budget in retirement
This is how much you expect to spend annually in retirement each month. Experts often recommend replacing 80% of your income per year in retirement to enjoy a comfortable retirement.
5. Annual pre-tax income
This is the amount of money you make each year from all income sources, before you set aside money for taxes. It’s important that the figures you provide are as accurate as possible, so your retirement calculations are correct.
6. Monthly contribution
The amount you put away each month for your retirement. This will include contributions to your IRAs, your 401(k), including any matching employer contributions, and any other retirement savings accounts. While there is no set amount to save for retirement, experts often recommend saving between 10% and 15% of your pre-tax salary each year.
7. Life expectancy
Our calculator uses a life expectancy of 85 years. The Social Security Administration provides a “life expectancy calculator” that will show the average number of additional years a person can expect to live based only on the sex and date of birth you enter.
8. Average investment return
This should be the amount you expect your investments to earn between now and retirement. Our calculator sets this at an average 6% annual return.
9. Annual income increase
The percentage amount you expect your income to increase each year. The calculator sets this as 2%.
10. Other retirement income
This should include any income you expect to receive in retirement, not from your retirement accounts and not included above.
Results
The calculations will show you how much money you will have in retirement based on your current contributions and savings.
It will also detail the amount of money you will need to realise your dream retirement.
What is the retirement age in the US?
Currently, the full retirement age is 66 if you were born from 1943 to 1954.
This increases gradually for those born between 1955 and 1960, and for anyone born in 1960 or later, you’ll only receive full retirement benefits at age 67. In other words, by 2023, the retirement age will be 67.
If you retire at 62, you’ll be eligible to receive a reduced Social Security payment. In contrast, those 65 and over will receive some free Medicare benefits if they paid contributory taxes for at least 10 years.
How much should you save for retirement?
There’s no easy equation that demonstrates how much you should save for your retirement.
Thanks to the various external factors that can have implications on your income, experts are reluctant to offer a definitive number.
However, there are some common rules of thumb experts often cite when making recommendations, such as:
The 10% rule
Experts often recommend saving between 10% and 15% of pre-tax income each year during working years.
For example, if you earn $100,000 a year, you should save between $10,000 and $15,000.
This would accumulate over time, along with the interest you would earn, to deliver a substantial sum of money for retirement.
The 80% rule
Other experts say that 80% of a worker’s pre-retirement income should be enough to maintain a similar standard of living in retirement.
Taking the $100,000 example again, this rule suggests that a retiree will have a similar standard of living with $70,000-$80,000 in income after retirement.
However, this does depend on how you envision your dream retirement. For those who want to travel or spend more than before, they will need a higher income. Those who plan to have a simple retirement will need less.
The 4% rule
If you know how much you will need annually in retirement, this rule states you should divide that number by 4 to determine your overall retirement amount.
For example, if you think you need $80,000 in retirement, your overall nest egg should be $2 million.
Retire with a financial advisor
Should you opt to work with a financial advisor and get expert guidance when planning and saving for retirement, this is the amount of money you could potentially have when you retire.
Multiple industry studies suggest that professional financial advice can add 1.5% to 4% to portfolio returns over the long term. This depends on the time period and the method used to calculate returns.
Get expert retirement advice
Getting ready for retirement can be a complex and overwhelming experience. With so many factors at play, it pays to get expert advice.
From making confident investment decisions to identifying ways you can grow your assets; a financial advisor will work with you to create a financial plan that will help make your dream retirement a reality.
Unbiased can match you with a single financial advisor perfectly suited to meet your needs. Answer a few simple questions, and we’ll look after the rest.