Retirement Calculator: How Much Do You Need to Retire – GrowthRapidly



July 30, 2022
Posted By: growth-rapidly
Tag:
Personal Finance

What is a retirement calculator?

A retirement calculator is a tool that helps you know how much money you need in retirement. A retirement calculator takes into account your age, income, desired retirement age, your current savings, your monthly savings, your marital status, your retirement plans (such as, 401(k), 403(b), Roth IRA, Traditional IRA), your social security and pension benefits.

Everyone would like to live comfortably in retirement. Therefore, having a retirement plan is very important, because you have to know how much you need in order for you to plan for it. It’s never too early to start saving for retirement. In fact, the early you start, the better.

Do you need help planning for your retirement? Find a financial advisor who serves your area with SmartAsset’s free online matching tool.

Understanding Retirement Calculator

A retirement calculator calculates how much savings you will need at retirement and how much you will have, so that you can live comfortably. Also, a retirement income calculator considers the number of years in retirement, and assumes that that you live to 20 plus years or so. A retirement calculator also considers the tax rate based on your state.

Then, it will provide you how much money will be provided by social security and any employer-provided pension. Based on your lifestyle you provided, a retirement calculator will recommend how much retirement income you will need.

Best Online Retirement Calculators

A retirement calculator is a great tool to use to know if you are saving enough for retirement. However, a simple google search for retirement calculators will return thousands. Therefore, it can be difficult to know which ones are indeed the best. The best retirement calculators include, but not limited to: 

  • SmartAsset Retirement Calculator;
  • The Vanguard Retirement Income Calculator
  • Personal Capital’s Retirement Planner

SmartAsset Retirement Calculator

The SmartAsset retirement calculator makes it easy to just type in some basic information and get answers to your retirement questions. It gives you an estimate on how much you will need to retire. The retirement calculator will ask you a series of questions.

First, the SmartAsset Retirement Calculator will ask you where you live. This information is important because they need to figure out the taxes you will pay in retirement.

Once you enter your city and state, then the next question is your annual income. Again, they need to know your annual income in order to calculate your taxes and needs in retirement. The 3rd question the calculator will ask you is the age in which you will select your Social Security benefits. They will use this information to calculate your Social Security income in retirement.

After you enter that information, the next question is how much you are saving per month. They use this piece of information to distribute your contribution optimally among different retirement accounts. 

The next question this retirement calculator will ask you is the estimation of what your annual expenses will be in retirement. The SmartAsset Retirement Calculator will use this to figure out how much income you’ll need to generate from your retirement savings. 

Other question will be about the year you were born. This is used to figure out the years you have to save, and your benefits from social security. You will be asked to add your 401(k), 403(b), or 457(b) account details as well if you have any. So, you will add the type of retirement accounts available to you and the current balances.

If you have an IRA, you will need to add your IRA account details as well and the current balances. If you have a pension enter the information including the type and amount.

You will need to add your cash savings and investments balance as well.  Note that this does not include your Retirement Accounts (401k, IRA, Pension).

Once you enter all of this information, the SmartAsset Retirement Calculator will tell you exactly whether you “have sufficient savings for a lifestyle in retirement that covers your annual retirement expenses of $81,200, we recommend saving a minimum of $2,065 a month.” It will tell you if you retire at 66, for example, you will need this amount of retirement savings.

It will also breaks down your annual post-tax income at retirement. It will tell you that your retirement accounts and social security benefit will provide a certain amount of combined post-tax retirement income. Based on your selected lifestyle in retirement, the SmartAsset Retirement Calculator would recommend a  yearly retirement income.

Key Illustration:

Let’s say you make $125,000 a year. You would like to retire at age 65. You have a balance of $32,000 in your 401k and contribute at least $1200 a month. Below is a summary of the information you will receive from the SmartAsset Retirement Calculator:

How Much Money Do You Need to Retire

$2,239,985

To maintain your desired lifestyle in retirement – From age 66 through 95, you will need total savings of $2,239,985 at age 66
Estimated Annual Income Needed in Retirement

$166,654

Your current savings plan, including Social Security benefits will provide the equivalent of $146,056 a year in retirement income. We project you will need $166,654 annually to maintain your desired lifestyle in retirement.
Estimated Social Security benefits
$54,391
We estimate your Social Security benefits will be $54,391 a year from age 66 to 95.
Tax Rate
Today
29%
Tax Rate
In Retirement
22%
Your current marginal tax rate is 29% vs projected marginal tax rate in retirement of 22%. As your tax rate today is higher than your tax rate in retirement we recommend making your 401k or other tax deferred accounts your primary savings vehicle. Illinois state is a low-tax jurisdiction for retirees, the average tax burden on retirees is 0.6% compared to the national average of 1.9%.

Vanguard Retirement Income Calculator

Another simple, yet effective retirement calculator is the Vanguard Retirement Income Calculator. Using this calculator helps you see where you stand in relation to your retirement goal and map out different paths to reach your target. 

Personal Capital’s Retirement Planner

The Personal capital Retirement Calculator is another great one that makes the list. Thanks to its financial dashboard, once you add all of your investment accounts to it, this retirement calculator will take all of the data and runs several scenarios for you automatically. It displays the results with attractive graphs and tables.

In conclusion

A retirement calculator is a good tool to determine how much money you need to save in order to live a comfortable life. While there are several online retirement calculators, the three great ones that are worth your time are the SmartAsset Retirement Calculator, the Vanguard Retirement Income Calculator and the Personal Capital Retirement Planner.

In the end, saving for retirement can be stressful if you don’t know how much you actually need to save. That’s why this free retirement income calculator is great and helpful. The SmartAsset retirement calculator is a great tool to analyze your options.

Take This Quiz to See if You can Retire Comfortably

Preparing for retirement requires careful planning and consideration. With SmartAsset’s free quiz, you can get matched with fiduciary financial advisors that serve your area who can offer you professional advice. Simply select your retirement target date to get started . Find out more about how working with a financial advisor can help you try to achieve your financial goals and take the quiz now.

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