With a retirement calculator, you can easily estimate how much money you will save for retirement. The retirement savings will help you live the life you’ve always wanted as your kids grow up and you stop working and have some time for yourself.
Pina coladas on the beach, a trip to Europe, Africa, or Asia, downtime with the family, doing some housework, devoting time to your hobbies—these are all the things you can achieve if you start thinking about your retirement income.
But, before you move onto that step, you can do some retirement planning by using the retirement calculator.
What is the Retirement Calculator?
The retirement calculator allows you to estimate the savings in dollars. It will show you if you’re on track for the retirement you want. Whether you are getting ahead or falling behind, it is quite useful to know where you stand before you make any moves.
To calculate your retirement savings, use this calculator.
How to Use a Retirement Calculator?
Using the retirement calculator isn’t too difficult. There’s some information that you need to submit to calculate how much money you expect to save for retirement.
The calculator is divided into two parts:
- Pre-Retirement Assumptions
- Post-Retirement Assumptions
Pre-Retirement Assumptions Information
Here, you need to include the amount that you have currently saved. After that, there’s the annual income, but also the inflation rate, which you can quickly check on Google. The current inflation rate in the US is 4.93%.
After that, you need the contribution percentage, employer match percentage, and annual return rate percentage.
Last but not least, you must add your current age and your retirement age. Here’s how it looks:
Post-Retirement Assumptions Information
In this part of the calculator, you get a chance to include the desired monthly income before tax. You can see the percentage of your monthly income, and the calculator will automatically show the monthly savings.
In addition, there’s the monthly social security category in current dollars. If you don’t know the information here, the app will estimate social security benefits based on your age and income, which is good enough if you want to get an estimate and not an exact amount of the retirement savings.
Still, there are a lot of variables, and everything can change in just a few months, but you can always come back and do the calculations again.
If any, enter your monthly income from other investments and also the annual retirement return in percentage, retirement years, and retirement tax bracket.
This is what both sections look like:
After that, all you need to do is click “Calculate,” and it will show you the results below.
Example: How to Calculate Your Retirement Savings
Let us show you quickly how the calculator works and what we need to do to come up with the retirement plan.
We’ve created a made-up situation just to show you how the calculator works and what results it will show:
With these inputs, all you need to do is click on “Calculate,” and you’ll get the results below. For this one, the results are:
As you can see, the calculator presents several categories for your retirement savings. For these inputs, we’ll need to up our game when it comes to income and savings and make sure we’re on the right path.
Different Types of Retirement Calculators
Before we move on to talk about boosting pre-tax income and coming up with a bullet-proof plan, we need to address some other calculators and similar tools that can help you achieve your retirement goals.
Here are three tools and calculators that you can use for your retirement plans.
Retirement Planner
There are a lot of things you can do with a retirement planner. It will give you an overview as you are saving for retirement, and all you need to put down is your monthly savings sum and annual return rate.
Go to the retirement planner and explore various options, such as:
- Start Early and Save Regularly
- Set Goals for Retirement
- Max Out 401 k or IRA Saving
- Invest Wisely
- How Much Money Will I Need?
- How Long Will My Money Last?
- How Much Should I Withdraw?
- Inflation Matters
We used the first option to illustrate how the planner works. For each of the categories, you will get a graph that looks something like this:
401(k) Calculator
A 401(k) is a tax-advantaged retirement account that a lot of Americans use. It is set up by employers, for employees to use. There are three main rules that you should know about a 401(k).
- You pay much less tax on what goes into a 401k
- The contribution limits change each year, and they are approximately $20,000 per year (for 2023, the limit is: $22,500). If you go over contribution limits on their 401(k), you may pay taxes twice.)
- You can’t take the money out until you turn 59.5 years old (you can, but you pay a penalty that totally removes the value in putting the money there in the first place)
How Does a 401(k) Work?
Typically, you pay a percentage of each paycheck into your 401(k), and most employers will make a matching contribution. On average, people usually put in 2–6% of their paycheck. As for the matching contributions, employers do this as a benefit; whatever percent they match can effectively be seen as a raise.
There are two ways to put in money:
- Traditional: you don’t pay income taxes on the money now, but you do pay taxes when you withdraw the money in retirement
- Roth: you pay income taxes now, you don’t pay any income taxes on the money when you withdraw in retirement
How to Use the 401(k) Calculator
Back to the calculator. Now that you know how a 401(k) works, it will be easier for you to calculate your retirement savings more accurately. Here’s how the calculator looks:
All you need to do is enter the data above to get the retirement savings calculations you get with your 401(k).
There are many other retirement calculators that will assist you on your journey to an early retirement, help you pay taxes, calculate annuities, analyze retirement savings, etc. But with the first calculator, the retirement planner, and the 401(k) calculator, you have a lot of tools at your disposal that are easy to use.
These will help you save some extra money and create a nice nest egg for your future. But now, let’s see how to organize your total savings.
Retirement Accounts
How you organize your finances is equally important as how you plan for retirement. With a good organization of retirement accounts, you can take savings to the next level and make the most of them.
Here are the potential accounts you can have as you start working on your retirement savings:
Individual Retirement Account (IRA)
Opening an individual retirement account will help you organize your income and enjoy the tax benefits that such accounts offer. One of the tax benefits is that you pay taxes only when you withdraw money.
Traditional IRA vs Roth IRA
Traditional IRAs allow you to contribute either pre-tax income or income after taxes. Your money grows tax-deferred, and your withdrawals are taxed. On the other hand, Roth IRAs also offer tax-free growth, but you need to pay taxes before you contribute to your nest egg. Having said that, your withdrawals are tax-free.
A traditional IRA is generally better for people in the lower tax bracket. Those who make more money cannot get the deduction, which is why they choose a Roth IRA. If you have a traditional IRA, you can switch to a Roth IRA in the future.
Money Market Accounts
Another option you have for your retirement savings is to open a money market account. With it being FDIC or NCUA-insured, it is a great savings account that you can use. This savings account pays a higher interest rate compared to some other options, and it requires a minimum deposit to open it.
Don’t confuse this account with a money market mutual fund account. Mutual funds are offered by firms that provide brokerage services, and they are considered an investment rather than a savings account.
General Investment Account
To avoid getting too complicated, we’ll simply recommend the general investment account. This is different from regular savings accounts because of the tax break savings accounts offer. But with the investment account, you can build up your retirement portfolio and increase your income.
Investing involves risk, and you might need investment advice from a financial advisor. Either way, you can improve your annual income significantly and create passive income streams (e.g., rental income) that will boost your retirement savings. And just like the savings calculator, you can also find an investment calculator online that will help you out.
Most retirees don’t invest. They believe that saving enough money and creating a nice retirement nest egg will be enough to get them through the final stage of their lives. Although you need to save for retirement, you should also look for different ways to boost your current income, explore different investment choices, and use past performance and experience to make better decisions in the future.
There are some other tax-advantaged retirement accounts that can help you organize your retirement income, but we won’t get into too many details now. There’s more ground to cover.
How Much Money Do You Need to Retire?
By the time you reach retirement age, you need to have a certain amount of money in your retirement accounts. Keep in mind that you’ll have annual retirement expenses with little to no income (if you don’t take action early).
The retirement age in the USA is 65, while social security benefits start at 66 and will rise to 67 for people born in 1960 and later. There are early social security benefits that are available at the age of 65, but they aren’t maximized.
You can choose to call it quits early if your pre-retirement income allows you to do so. There’s no exact amount that you need to save for retirement, but we’ll try to provide you with some numbers to give you an idea of what to expect.
The life expectancy in the USA is 77.8 years, and it is dropping. Assuming that you retire at the age of 65, you have about 12–13 years to go. To get a more personalized idea, take a look at your family’s medical history to calculate any potential medical expenses and the life expectancy of your family members and relatives. Also, take into consideration your habits and overall health, and try to predict how long you’ll live.
Fun Stats About Retiring in the USA
- A commonly cited guideline is to aim for a retirement savings target of 10 to 12 times your pre-retirement annual income. For example, if your annual income is $50,000, you should aim to save $500,000 to $600,000 for retirement. This estimate assumes a retirement age around 65 and a similar standard of living in retirement.
- A more comfortable retirement usually requires a higher savings target. Financial experts often suggest aiming for a retirement savings target of 15 to 25 times your annual income.
- According to the Social Security Administration, as of 2023, the average monthly social security benefits are $1,681. However, individual benefits and the retirement income can vary depending on factors such as work history and the age at which you start claiming benefits.
Best States to Retire in the USA
A lot of people decide to move before or after they retire. Usually, they relocate from big cities to a more quiet area where they can enjoy life. Below, we’ve presented you with a map of the USA to see which states are better for fulfilling your retirement dreams:
With the map, you have a general overview of the best states to retire in. But we’ve also prepared the top 10 countries to retire in the USA and graded them in different categories, including the overall rank.
| State | Rank | Score | Prices | Well-being | Diversity | Weather | Crime |
| Florida | 1 | 32.04 | 18 | 20 | 1 | 5 | 27 |
| Georgia | 2 | 30.37 | 7 | 35 | 37 | 4 | 29 |
| Michigan | 3 | 30.19 | 1 | 39 | 30 | 36 | 26 |
| Ohio | 4 | 29.79 | 11 | 32 | 34 | 21 | 20 |
| Missouri | 5 | 29.78 | 3 | 36 | 32 | 19 | 42 |
| Kentucky | 6 | 29.25 | 5 | 47 | 50 | 3 | 11 |
| Texas | 7 | 29.07 | 9 | 27 | 48 | 10 | 38 |
| Tennessee | 8 | 28.85 | 2 | 42 | 33 | 13 | 45 |
| Pennsylvania | 9 | 28.10 | 27 | 18 | 15 | 33 | 12 |
| S. Dakota | 10 | 28.06 | 15 | 33 | 16 | 41 | 22 |
How to Boost Your Retirement Income
If you want to increase your monthly gross income, there are several things that you can do. No matter what your current age is, the sooner you start tracking your finances and saving money, the more you’ll be able to accumulate and invest. For example, it is possible to retire comfortably after 10 years if you start with no savings at all!
Start right now. You don’t require any special knowledge to track your daily spending and adjust what you spend your money on. With price increases, your purchasing power dwindles, and you need to take care of your spending.
You’ll learn on the go. Only when it comes to making investment choices should you look for financial advisors who will help you move in the right direction.
Come up with a plan and stick to it. Figure out how much income will be needed for a secure retirement. Is it your spouse’s income that you’ll take into consideration, or are you saving for retirement yourself? What kind of retirement lifestyle are you looking to lead? What are your current retirement savings? Be realistic and create a plan that works.
Don’t be afraid to adjust as you go. Your current retirement savings might change over time; you might have to spend them or add to the nest egg. Revise your plan and continue from there.
Lifestyle Banking for Retirement
One of the best systems that will allow you to plan for your retirement is lifestyle banking. All you need to do is buy a whole-life insurance policy from a mutual company and pay premiums to increase the cash value.
You will earn money by taking out insurance loans while your cash value grows uninterrupted. As you pay back the loans, you’ll also recapture interest, which will further increase your savings. This is a tax-advantaged method of saving money because your cash value isn’t subject to taxes.
When you calculate what you need to retire, you can see which whole life insurance policy is the best one for you and how high the premiums will be. The policy is adjusted to your unique needs, allowing you to live comfortably but also earn on the go.
Lifestyle banking provides security, and it is a great method that will allow you to retire with the desired amount of money. However, it requires discipline, and it will take you years until you can become more flexible with loans and how you use your money. But you’re not in a rush. You’re saving for retirement anyway; why not be more effective?
Reach Full Retirement Age Comfortably
Use the calculators we’ve provided you with to plan for your retirement and apply the other tips as well. If you’re looking to start with lifestyle banking and see how to implement this system to create generational wealth, watch our FREE masterclass.