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Retirement Calculator

This retirement calculator shows how large your savings grow by retirement and what monthly income they can pay afterwards. Example: 20,000 today plus 500 a month at a 5% return grows to 745,248 after 37 years – 358,174 in today’s money.

Source: Brealey/Myers/Allen: Principles of Corporate Finance – future and present value of level payments (annuities), real and nominal interest rates; presentation: Wikipedia “Time value of money”. Updated: .

years
years
years
The pot is fully drawn down by this age.
Paid in at the end of each month until retirement.
% per year
% per year
Often lower, because retirees tend to invest more cautiously.
% per year
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Result

Result
Savings at 67: 745,248 (358,174 in today’s money) · income until 90: 1,449 per month in today’s money
Balance by age
AgeBalance (nominal)In today’s money
3020,00020,000
3559,43353,830
40109,75990,041
45173,991129,278
50255,968172,259
55360,594219,793
60494,127272,793
65664,552332,294
67745,248358,174
72659,304286,998
77538,373212,264
82374,665133,793
87158,91851,400
9000
Working
  • Saving phase: 37 years (444 monthly contributions) at 5% a year grow to 745,248 – 242,000 paid in and 503,248 investment growth.
  • Purchasing power: 745,248 ÷ (1 + 2%)^37 = 358,174 in today’s money.
  • Withdrawal phase: real return (1 + 3%) ÷ (1 + 2%) − 1 = 0.98% a year; spread over 276 months that pays 1,449 per month in today’s money.
  • In nominal terms the first withdrawal is 3,016; it then rises with inflation every year.
A projection with constant returns and inflation, before taxes, fees and any state or workplace pension. Pure arithmetic, not investment advice – real returns vary.

How it is calculated

A retirement calculator joins two calculations: building up savings until you retire and drawing them down afterwards. Inflation is what ties them together, because a sum received 37 years from now buys far less than the same sum today. That is why every figure is shown both in nominal terms and in today’s money (real terms).

Formulas

Saving phase: FV = P × (1 + i)ⁿ + C × ((1 + i)ⁿ − 1) ÷ i, with monthly rate i = (1 + annual return)^(1/12) − 1, n months and a contribution C at the end of each month. Purchasing power: FV ÷ (1 + inflation)^years. Withdrawal phase: the real return is (1 + return) ÷ (1 + inflation) − 1 (the Fisher equation); the monthly income follows from the annuity formula W = FV × j ÷ (1 − (1 + j)^−m) with the real monthly rate j and m months.

Worked example

Age 30, retiring at 67, 20,000 saved, 500 a month, 5% return: after 444 months the pot is 745,248, of which 242,000 was paid in and 503,248 is growth. With 2% inflation that equals 358,174 in today’s money. At a 3% return in retirement the real return is 0.98%; if the money has to last until 90 (276 months), it supports 1,449 a month in today’s money. In nominal terms the income starts at 3,016 and rises with inflation.

Frequently asked questions

How much do I need to save for retirement?

It depends on the income you want. Try different contributions until the monthly income in today’s money matches your needs, after allowing for other retirement income.

What does “in today’s money” mean?

The amount is adjusted for inflation. In the example, 745,248 in 37 years is worth as much as 358,174 today at 2% inflation.

Why is the return during retirement set lower?

Many savers move into less volatile investments before they retire. You can enter any value you like for either phase.

Does the income rise with inflation?

Yes. The calculator keeps the purchasing power of the income constant: in the example it starts at 3,016 in nominal terms and is increased by inflation each year.

Sources and legal basis

As of: · Editorial policy

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