How much do I need to retire? When can I retire? Use my retirement calculator to find out!
Most retirement calculators, from Dave Ramsey to Vanguard, ask for your retirement age and then tell you how much you’ll have by then.
But for the financially independent, we want to know when we can retire, not the other way around.
So I created a different retirement calculator for us.
This retirement calculator asks you how much you want to spend in retirement and tells you how much longer you’ll have to work.
The When Can I Retire Calculator
note: enter numbers only. do not enter $ or commas or other symbol.
My retirement calculator asks you three questions:
- How much do you have?
- What’s your yearly savings?
- How much do you want spend in retirement?
When you answer them, the calculator will answer the four key questions about your retirement:
- How much do I need to retire?
- How much do I still need to save for retirement?
- When can I retire?
- How long will my retirement savings last?
This retirement calculator already has market assumptions baked in. But you can also adjust to see how they impact results.
I haven’t found any retirement calculators out there that is quite this simple. And since I love Dave Ramsey, I’m calling this my Better Than Dave Ramsey Retirement Calculator.
Retirement Calculator Explained
Your retirement plan hinges on the answers of these four questions.
- How much money do I need to retire?
- How much money do I need to save for retirement?
- When can I retire?
- How long will my retirement savings last?
Let’s go over how they impact your ability to retire, one by one.
Question #1: How much money do I need to retire?
Whenever someone asks you “how much money”, they’re asking for your net worth.
This retirement calculator takes into account both your estimated retirement expenses, and the withdraw rate, to calculate how much money you need to retire.
Below is at table that shows how your retirement number in the middle, and how it can vary wildly depending on your retirement expenses (first column) and withdrawal rate (first row).
Remember: if your expenses is $100K, it means you get $100K to play with. Some of that $100K may need to be paid to taxes if you are taking it out of a retirement account where the money has grown over time.
If you want to spend $100K a year during retirement, plan to save somewhere between $2.5M to $3.33M.
Example: My family plans to spend $11K per month in retirement, and we’ll be taking it out our retirement account where capital gains tax is assumed to be 20%. Therefore, I expect to spend $132,000 (11,000*12) but I’ll assume 25% of my money will be paid to taxes, so in reality, we need $176,000 (132,000 / 0.75) per year. I use the conservative 3% withdraw rate. This means I’ll need $5.87 million (170,000/0.03) in net worth before I can retire.
Question #2: How much money do I need to save for retirement?
To understand how much money you need to save still, you need to know how much money do you have today.
This is a net worth question, and you can find yours using Personal Capital.
I use Personal Capital to track my net worth and monthly expenses and savings.
I also wrote a blog post about Personal Capital if you want to check it out.
Once you understand your current net worth, expense and savings, the retirement calculator will help you figure out the rest.
Example: our net worth right now is $3.8 million using personal capital.
Question #3: When can I retire?
You can retire when you have hit your retirement net worth goal.
The more you save, the earlier you can retire.
The chart below varies savings per month, and looks at its impact on number of years until retirement. With other variables staying constant.
Our retirement calculator shows if you bump your saving from $667 per month to $1,333 per month, you can retire 12 years earlier.
That’s right: a decade of no work if you can conjure up $600 more per month.
Example: our net worth is $3.8M, we need $5.87M to retire – that is we still need to save another $2.07M.
Question #4: How long will my retirement savings last?
Once you retire, your retirement savings should last you at least two decades.
But if you are retiring earlier in life, you might want to make your retirement savings last longer.
How do you do that? Well, you can do some part-time work or simply spend less money.
In this retirement calculator, we used a fairly conservative method.
So if you see that your retirement savings can last you 25 years, it can likely last you longer because we are assuming your spending will stay the same as you age, whereas most models assume your spending will decrease.
If you want to be conservative, simply lower your withdraw rate from 4% to 3% or even 2.5%.
Market Adjustment inside the Retirement Calculator
Of course, market conditions also influence how fast you can retire.
But remember: this is something you largely cannot control.
In life, we know that your success is a combination of luck and hard work. Think of market conditions as luck.
If you live in the United States, you are already pretty lucky. So don’t push your luck too far by betting everything you have on a single stock or cryptocurrency.
Remember: slow and steady wins the race.
Go slow but remain steady.
Invest index funds and have your success be guaranteed by the hard work of consistently saving money.
Annual investment return
In general, I still recommend that people invest their money into index funds.
The United States stock market has steadily returned on average 7% since its beginning.
Assuming you won’t allocate 100% of your investment into the stock market, we can assume that your average investment return is somewhere between 4% to 6%.
I have used a 6% return as the default rate, but you can certainly lower it if you want.
There is a lot of talk that with the Federal Reserve printing money into the economy, we’ll see more inflation.
In 2022, inflation started to go above 3% into the 7% territory. Some people say we will likely return to the 2% inflation soon though to get there, our interest rate will be permanently higher at 4% instead of the near 0% interest rates we’ve been seeing in the past decade.
But for most of the U.S. history, our inflation has held steady at 2.0%. Y
So we should assume an inflation of 2.0% in the future until we see anything becoming permanently different.
Safe withdrawal rate
The safe withdrawal rate is the percentage of your net worth going toward expenses each year.
The most popular rule on the safe withdrawal rate is the four percent rule.
This rule says you can take out 4% of your net worth each year in retirement and never have to worry about running out of money.
This rule was created using historical data on stock and bond returns over the past 50 years.
A study done by William Bengen looked at the stock market crashes of the 1930s and 1970s, and concluded that even during the recession, the four percent rule can last people for at least 30 years.
How much should I save for retirement?
In order to retire early, you have to save more than the regular Kumar.
If most people are saving between 10% to 20% of their income, you have to save more.
My rule of thumb is to save at least 50% of your income.
Last year, my family was fortunate enough to save 70% because we do make a lot compared to the average American.
But compared to other people at our income level, we are much less extravagant. We still rent, we drive a beat-up car with more than 150,000 miles on it, and I don’t remember the last time I bought new clothes.
Sure, I enjoy fine dining, that’s my guilty pleasure, and I buy a lot of tech gadgets and Starbucks. But we stay within our budget, and then some, and never compare ourselves to our friends with fancy cars and giant houses.
Retirement Calculator: Summary
I hope you enjoyed using this retirement calculator. If you have any feedback. questions, feel free to comment below.
And I’d love to hear your results! Please share your net worth goal and other details, and let us know if you are satisfied with your plan!
Here, I share the stocks that I personally invest in for fun: Best Stocks to Invest in Long Term: 20% of My Portfolio
What is wrong with America? Two words: Wealth Inequality: How to Make Money Despite Wealth Inequality
How much SHOULD you have by now? Try out another calculator: the Net Worth by Age Calculator
You might want to check your calculator for inputs when one has already accumulated more than they need likely at an older age trying to figure out if I will be ok to retire now! I get completely incorrect answers such as I need to save a negative $ figure and it says I can retire at 39 when I’m 48 now. Something in your calculator in my situation is NOT computing correctly. I do love your website and I come here often to read your articles!
Hi! Thank you so much for pointing this out. This has been fixed. What likely happened is that you are actually already READY for retirement, and the logic did not take into account of people who are already ready. But now it does. 🙂 Let me know if you run into any other issues, I am constantly improving. And thanks for being a reader of FFW!
Thank you! I want to retire but scared to at my age! I really ENJOY reading your articles! So keep writing and I will keep reading! Thank you for your work!
Thanks for the calculator. I’ve used it several times now to calculate several scenarios. I’m thinking about retiring in Eastern Europe since the cost of living is way cheaper.
Would you retire in another country because living costs are lower?
Thank you! I’m glad you found the calculator helpful. I don’t think I would move to another country just because it’s cheaper. There are other factors to consider, including living in a place surrounded by families and friends, a place whose values and cultures align with my own. I want to live in a place where I feel like I am part of a community – if that is achievable in a different country, I am willing to consider. We are social animals after all. Anecdotally, I know a couple who retired in Hungry and they love it there but that’s because the wife knows Hungarian. I know another who is retiring in Taiwan, but they speak Mandarin. So it can definitely work. But cost is just one of many considerations.
Adam Hills says
is social security figured into this?
Where does your calculator take into account social security?
It does not