We developed a great tool to estimate where you will end up at retirement, how much money you are most likely to end
up having before retirement so you can live a peaceful and comfortable retirement.
We will ask you a series of questions that will allow our calculator to come up with the most likely retirement scenario.
First, we are going to need to know your age and the age you want to retire at.
Now, let's go on by taking a look at the age you are planning to retire. Currently, the average age for retirement is estimated at about 60 years old; however, many finance professionals are expecting that people will work longer in the future, so the average may increase. A lot of people decide to wait until they turn 62 to retire, which is when they can start accessing partial Social Security benefits. Another age that people choose for retirement is 65, when people can get Medicare. Also, many Americans decide to retire at 67, which is when they can tap into full Social Security benefits.
Most financial professionals recommend retiring later than sooner. People are living longer, which means that retirement savings have to last longer; so, by retiring later (say 70 years old), you will help your savings grow significantly and you will likely maximize Social Security benefits.
With that said, think about a realistic age in which you think you will retire.
You are doing great! We've identified your age and when you plan to retire, which will give us an idea of the retirement saving period you'll be dealing with (the period of time you are expecting to save money for retirement).
The next step is to see how much you are making now and what you expect your salary to increase in the future. We understand that salary growth is a bit complicated to accurately predict, we recommend using the expected annual inflation rate (normally around 3%) as your expected annual salary growth. Feel free to modify that below if you think your salary will grow more or less than that.
So far, a lof of what we talked about is expectations about the future, but now, we need to know if you have any current retirement savings already in place. It is alright if you haven't started yet, but most financial planners recommend to start saving for retirement ASAP! The sooner you put aside the first dollar, the more it will grow, which increases your chances of living a calm retirement.
Tell us what your current retirment savings are so we can estimate their future growth expectations and more accurately predict whether you will be able to afford that trip you've always dreamed of at retirment.
Very well, you are almost done! Now come two of the most important questions in order for us to predict your retirement funds:
As we mentioned before, it is really important to start saving for retirement ASAP, but the question is: "How much are you supposed to save? How much of your salary are you willing to put aside for retirement?"
Many finance profesionals advise to take advantage of 401-k plans (if available). These plans are structured so you set aside a portion of your salary (every paycheck) and your employer matches your percentage until a certain point.
For instance, imagine that you make $1,000 per paycheck, and you decide to save 10% of that in your employer's 401-k plan, so you'd be saving $100 every paycheck. Your employer has agreed to match all of your savings up to 4%, so they will put $40 into your 401-k every paycheck. In the long run, that employer's match will make up a big part of your retirement savings.
Now, you have established how much you want to save and for how long, but where is all that savings money going? That is a tricky questions, as it depends on your willingness and/or ability to take on risks and your overall strategy.
When you save for retirement, either through your employer's 401-k plan or by yourself, you are most likely investing the money you set aside periodically into a portfolio (group) of assets (like stocks or bonds), which have different risk and return prospects. It is important that you invest in a mix of assets that suits your characteristics and investment objectives. We can help you determine what is your optimal portfolio.
When investing, it is important to use a specific strategy and to stick to it, and also revise your strategy in different moments of your life. For instance, younger investors can typically affor to take on higher amounts of risk than older investors.
Conservative investors have little room for risk and expect annual returns of 3% to 5%, average investors expect some 6% to 9% returns for a higher level of risk, and aggressive (optimistic) investors expect returns of 10% or more for a very high level of risk.
What do you expect your average annual return to be?
Almost there! For our last question, we need to know how much will you want to "pay yourself" at retirement. How much money will you need at retirement to live comfortably. This is a prety tricky question. Most experts say that, after retiring, you should want an annual income of 75% of your pre-retirement income. That means that if you make $50,000 a year right before retirement, you'd need at least $37,500 a year to live comfortably after retirement.
What percentage of your pre-retirement anual income would you want to use at retirement?