Calculate your projected retirement savings, inflation-adjusted expenses, and the annual contributions needed to reach your goal.
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Retirement Savings Formula
This calculator uses three formulas depending on what you solve for.
Projected savings at retirement:
FV = P(1 + r)^n + C * [((1 + r)^n - 1) / r]
Inflation-adjusted annual expenses:
E_f = E_0 * (1 + i)^n
Required annual contribution to reach a goal:
C = (G - P(1 + r)^n) * r / ((1 + r)^n - 1)
Where:
- FV is the projected savings balance at retirement.
- P is your current retirement savings.
- C is your annual contribution.
- r is your expected annual rate of return as a decimal.
- n is the number of years until retirement.
- E_f is your annual expenses at retirement after inflation, and E_0 is your current annual expenses.
- i is your expected annual inflation rate as a decimal.
- G is your retirement savings goal.
The first term grows your existing balance, and the second term sums the growth of each yearly contribution. Inflation is handled separately so you can see how much income your future expenses will actually require in tomorrow's dollars.
Inflation Impact on Expenses Over Time
The table below shows how a $50,000 annual expense grows under different inflation rates so you can gauge the income you will need at retirement.
| Years | 2% Inflation | 3% Inflation | 4% Inflation |
|---|---|---|---|
| 10 | $60,950 | $67,196 | $74,012 |
| 20 | $74,297 | $90,306 | $109,556 |
| 30 | $90,568 | $121,363 | $162,170 |
Example Problems
Example 1. You have $100,000 saved, contribute $10,000 per year, expect a 6% annual return, and plan to retire in 20 years. Your current balance grows to $100,000 * (1.06)^20 = $320,714. Your contributions grow to $10,000 * [((1.06)^20 - 1) / 0.06] = $367,856. Your projected savings at retirement is about $688,570.
Example 2. Your current annual expenses are $50,000 and you expect 3% inflation over the 20 years until you retire. Your inflation-adjusted expenses are $50,000 * (1.03)^20 = $90,306 per year, so you will need that much income in the first year of retirement to match today's lifestyle.
FAQ
Why does inflation matter for retirement planning? Inflation steadily raises the cost of living, so the income that supports you today will not cover the same expenses decades from now. Adjusting your target for inflation prevents you from saving too little.
What return and inflation rates should I use? Many planners assume a long-run return of 5% to 7% for a diversified portfolio and an inflation rate of 2% to 3%. Use conservative figures if you prefer a safety margin, and update them as your situation changes.
Does this calculator account for taxes and Social Security? No. It projects pre-tax savings growth and inflation-adjusted expenses only. Treat the results as a planning estimate and factor in taxes, pensions, and Social Security separately.