Do you know how much money you will need per year in retirement? Do you know how that number will be affected by inflation? I would encourage you to check out our Retirement Nest-Egg Calculator Tool. While it may trigger a shock to your system when you see the numbers, it can help you get into gear to retire well.
This calculator is incredibly easy to use and only needs two pieces of information from you! All you need to do is enter the amount of money you would like annually in retirement and how many years until you expect to retire. After that, the calculator will compute the amount of money that you need to have saved and how different annual rates of return will change that number.
Below you can see a calculation that I ran for an “annual amount I want” of $75,000 if I hypothetically retire in 20 years:
As you use this calculator, keep a couple of things in mind:
The calculator assumes that you will never touch the principal.
The calculator assumes that you will give your nest-egg a “cost-of-living-raise” of 4% each year.
This calculator adjusts the “annual amount your want” for an average annual inflation of 4%.
So, at 4% annual inflation, I will need $164,334 per year in 20 years to have the same purchasing power that $75,000 has today.
The bottom six rows tell you what you need to have in your nest-egg at different rates of annual growth. At 8% annual return, I would need $4,108,356 when I retire. That number drops significantly if I expect growth of 12% and I would only need $2,054,178 when I retire.
These numbers may seem astronomical and you might feel like you will never build a nest-egg of that size. But remember, the power of compound interest can work in your favor! By starting early and investing consistently, you can watch your nest-egg grow to numbers you may have only dreamed of.
Want more tips like this one? Subscribe to the Monday Money Tip Podcast HERE.