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Retirement Calculator - Three Easy Steps

Here is a quick three-step methodology you can use to determine how much money you need to save for your retirement:

1. Estimate your annual retirement expenses and income.

2. Determine the size of your retirement nest egg.

3. Determine how much you must save and invest each month to achieve your nest egg.

What are your retirement expenses and income?

Estimate your annual expenses (housing, car, medical, insurance, taxes, food, debt payments and other). Be sure to include the effect of inflation on your expenses. For example, a three percent annual inflation rate causes your expenses to double in 24 years. So if you require $50,000 now, you would need $100,000 in 24 years.

How much money will you need in your retirement nest egg?

After you retire, you will use your retirement nest egg to pay bills and medical expenses and take vacations. To ensure that you never run out of money during retirement, your annual dollar withdrawal should equal the amount of money you add to the nest egg from interest and dividend payments and capital gains. If the dollar amount added each year is equal to or exceeds the amount that you withdraw, your principal will never fall. And it could increase.

The following simple formula computes the dollar amount that you must accumulate to ensure a stable nest egg:

Nest Egg Dollar Amount = Annual Dollar Withdrawal / Rate of Return on Nest Egg

The next table gives examples of nest egg dollar amounts.

Required Nest Egg Dollar Amount
Annual Withdrawal

For example, for a four percent return on your nest egg you would need to accumulate $1,500,000 to withdrawal $60,000 forever without reducing the value of the nest egg.

Easy-to Use Retirement Calculator

You may determine the size of your nest egg for any annual withdrawal and rate of return using the retirement calculator. NOTE: Enter only numbers on the calculator fields. Do not enter a dollar sign, commas or percent sign.

Retirement Calculator
Annual Withdraw Amount:
Annual Rate of Return:
Required Nest Egg


How much money must you save?

Each cell in the next table shows the dollar amount accumulated if you saved one dollar every month for a given number of years and you received a fixed rate of return on your invested money. For example, if you saved one dollar each month for 50 years and you received a four percent rate of return on your investments, you would have $1,909.36. If you saved $100 each month, you would have $190,936.

Dollars Accumulated - Invest One Dollar Per Month
Rate of Return

To find out how much money you must invest each month to achieve a nest egg of a given dollar amount, divide the dollar amount of the desired nest egg by the dollar amount in a years and rate of return cell. For example, to achieve a $1,000,000 nest egg in 20 years at a four percent rate of return, you must invest $2,726.50 ($1,000,000/$366.77) each month. For a 10-year period you must invest $6,791.17 ($1,000,000/$147.25) each month.

The next table shows how much you must invest each month to accumulate $1,000,000 for different periods and rates of return.

Monthly Savings Required to Accumulate $1,000,000
Rate of Return

The table shows that the longer you save and invest the less you have to save and invest each month to reach your goal. For example, with a four percent return and ten years to get to one million dollars, you would have to invest $6,791.18 each month. But if started with 40 years to go, you would need to save only only $846.05 each month. Obviously it pays to start saving and investing at a young age.

Next, the table shows that for higher rates of return on your investments you need to save and invest less money than for lower rates of return. For example, if you earn a six percent return over 30 years, you must invest $995.51 each month to get your million dollars. But if you earn only two percent on your investments, you need to invest $2,029.53 each month for 30 years.

Target Nest Egg Calculator

You can use the Target Nest Egg Calculator to determine how much you need to invest each week, month or year to become a millionaire.

When using the above tables or calculators, it's best to select a conservative rate of return such as four percent. If you select a high rate of return, such as eight percent, and you do not achieve it, you will miss your savings target because you did not save enough money. Don't try to substitute over confident investing for thrifty savings.

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