Retirement savings runs out at age 81.
Your plan provides $700,394 when you retire. This assumes annual retirement expenses of $64,337 which is 40% of your last year's income of $160,844. This includes $0 per year from Social Security.
How to Read Your Retirement Calculator Results
You can use this retirement savings calculator to glean a number of key insights including:
- When you’ll run out of money: People typically retire between the ages 65 and 70; using the retirement calculator above you can predict when you can comfortably retire by adjusting contribution amounts, contribution timelines and retirement dates; just remember that your retirement savings as of your retirement date need to last for the rest of your retirement, which can last for more than 30 years
- Growth of contributions: You should expect your account to earn an average annual return of at least 4 to 5 percent, which is the minimum you should be able to earn using the best CD rates; if you use an index or mutual fund instead, you should be able to earn 5 to 6 percent or more per year in the end
- Account growth: Between interest and new contributions your retirement savings should grow faster each year as you earn interest on new deposits and interest earned in the early years, so the sooner you get started with your savings, the better off your retirement account will be
- Next steps: If you want to learn more about how to save for your retirement, two things you can do are to maximize your retirement contributions at work and work with a financial advisor to meet your individual needs; to learn more, be sure to check out our article on how to find a financial advisor
How the Retirement Calculator Works
The retirement calculator is used to project the value of your retirement savings and how long it will last based on your retirement age and living expenses. The calculator bases its results on your estimated contributions, including escalating contributions based on increases in your income. You can also input your projected average annual investment return.
Once you hit a projected growth rate, the calculator deducts your projected income in retirement. However, retirement savings still continue to earn your projected annual return even after accounting for distributions during retirement.
Retirement Calculator Inputs
To get results from the SIMPLE IRA (savings incentive match plan for employees individual retirement account) calculator above you have to provide several inputs. These factors are then used to calculate SIMPLE IRA contributions and employer matching based on SIMPLE IRA rules. These inputs vary by user and may be higher based on employee age or higher employer matching.
1. Current Age
Your current age ties the projected value of your savings to your future age. This input can also demonstrate how important it is to start saving for retirement early. To see how significant compound interest can be on your results, enter your inputs and survey the results. Then, lower your current age by two years. All else being equal, your savings will last in retirement.
2. Retirement Account Contributions
Your annual contributions are the amount that you expect to deposit into retirement accounts each year. The amount of your expected annual contributions is also a great indicator of what type of retirement account is right for you. For more information, be sure to check out the Types of Retirement Accounts section below.
3. Annual Income Growth Rate
Growth in your annual income is important for your retirement savings. In the retirement calculator above, your average annual income growth rate is also applied to your retirement contributions, so that your contributions get larger each year as your income is projected to rise.
4. Average Annual Return on Retirement Savings
Aside from your average annual contributions, the anticipated average annual return on your savings is perhaps the most important factor affecting your retirement savings calculator results. Using the retirement calculator above you can enter this projection yourself. Your projected return will depend on what you invest in, but investors can typically expect to average at least 4 to 6 percent per year on previous contributions as well as new contributions and interest earned in previous years.
For another tool that shows the importance of compound interest on savings, be sure to check out our Free Savings Calculator.
5. Retirement Age
Your anticipated retirement age determines when the calculator stops adding new contributions and starts deducting your expected withdrawals. Your retirement age will also have a significant impact on when your retirement savings may run out. Most Americans aim to retire around age 65, so that’s our suggested starting point.
6. Retirement Income
The retirement income that you enter into the calculator is how much you think you’ll need to withdrawal during each year of your retirement to maintain your lifestyle. This number is typically lower than your average annual income in the years directly prior to retirement because people have usually paid off their mortgages and are no longer supporting dependents in retirement.
Retirement Calculator Outputs
After you complete the retirement savings calculator inputs, the calculator provides a projection of your retirement savings over time. Based on your annual contributions, average annual return, retirement age and annual withdrawals during retirement, the calculator provides a forecast of when your retirement savings will run out.
The outputs for the retirement calculator above are retirement savings balance per year, forecasted retirement savings chart and the age when retirement savings will likely run out.
1. Retirement Savings Balance per Year
The primary output of the retirement calculator is a projection of your retirement savings over time. This output is in the form of a table which shows all contributions and withdrawals, along with your anticipated retirement savings balance for up to the next 90 years.
2. Forecasted Retirement Savings Chart
In addition to the table that shows the project of how your retirement savings will change over time, the retirement calculator also provides a chart of your expected retirement savings over time. This chart shows the anticipated change in your retirement savings while contributions are being made as well as retirement.
3. Age When Retirement Savings Will Likely Run Out
The retirement savings calculator above estimates the age at which you will run out of retirement savings based on the table with your forecasted savings balance. This result is based largely on your withdrawals taken during retirement relative to your retirement savings at the time of your retirement.
Your expected annual return on retirement savings is another factor that has a significant impact on when your retirement savings will run out. This is because your account continues to earn interest even after you start withdrawing funds, assuming that you enter an average annual return greater than zero.
The age at which you start saving (the current age you enter into the calculator), as well as your anticipated retirement age, are the last two factors that determine when you will run out of retirement savings. These factors demonstrate the power of compound interest — the impact of earning interest on new contributions as well as previous contributions and gains.
Retirement Calculator Example
Let’s consider a pretend saver Mike who is 35 years old, which the median age among Americans. If we assume that Mike will retire at 65, that means that he has about 30 years left to save and build returns in his retirement account, after which we’ll assume he’ll need to start withdrawing about $25,000 per year.
Let’s also assume that Mike will earn about 5 percent per year on his savings, which is higher than current high-yield savings rates but not unreasonable for a 401(k) or other investment account. In this case, Mike can expect to have about $283,000 in savings when he retires at 65. Assuming he continues to earn 5 percent in his account while withdrawing $25,000 per year for expenses, he should run out of money at about age 82.
Early Retirement Savings Calculator Example
Let’s now assume that Mike has a job that he absolutely hates and really wants to retire early. Mike is eligible to start withdrawing money from an IRA or 401(k) without penalties when he turns 59 1/2, so let’s assume he retires at age 60.
If Mike decides to cut short his working years and retire at 60 instead of 65, that means he’ll only have about $204,000 in savings when he retires. Instead of running out of savings at age 82, the retirement calculator tells us that he’ll run out of money around age 70.
Types of Retirement Accounts
One of the best ways to maximize your retirement savings is to take advantage of the tax benefits offered to certain qualified retirement accounts. Many of these accounts offer tax-deferred contributions, which decrease your taxable income upfront. Your account also grows tax-free, and you don’t pay taxes until you start withdrawing money during retirement.
If you are a full-time employee at a company, your employer probably offers retirement benefits, and you can choose to participate in. Many of these accounts offer matching on employee contributions or even profit-sharing. More importantly, most employer-sponsored retirement plans are extremely cost-effective investment options and can greatly boost your personal finances in the long run.
Annual Retirement Contribution Limits 2018
While many retirement accounts are tax-deferred, some types of retirement accounts offer after-tax contributions. These accounts don’t offer tax breaks up front, but your account grows tax-free, and you can withdraw money tax-free during retirement. This helps you to avoid spending your savings as quickly during retirement.
Some of the most popular types of retirement accounts include:
A 401(k) plan is the gold standard when it comes to retirement plans. Plan participants are given the option of making tax-deferred contributions from their salaries, which are often matched by employers, providing a boost to employee savings. With profit-sharing, total 401(k) contribution limits are $55,000 — $61,000 with catch-up contributions.
Once you retire and start withdrawing money from a 401(k), those withdrawals are taxed as income. In addition, many 401(k)s allow you to borrow money against your account but you can’t withdraw money without penalties before age 59 1/2. Still, if you’re employer offers a 401(k) plan you should definitely participate for cost-effective investing and to earn employer matching contributions.
For more information on different types of 401(k) providers, costs and services, be sure to check out our list of the Best 401(k) Companies.
Some employers who offer 401(k) plans also offer Roth 401(k) accounts within their plan. Roth 401(k) contributions aren’t deductible from your taxable income. However, your account grows tax-free and funds can be withdrawn tax-free once you reach age 59 1/2. The costs, contribution limits and investment options of a Roth 401(k) are typically the same as those of a traditional 401(k) plan.
The biggest difference for a Roth vs. Traditional 401(k) is tax treatment. Traditional 401(k) withdrawals are taxed while Roth 401(k) contributions are taxed. This makes Roth 401(k) accounts an ideal option for plan participants who are already maximizing their contributions and want to start building savings that can be withdrawn tax-free during retirement.
For more information on how these accounts work as well as they’re costs, features and top providers, be sure to check out our ultimate guide to Roth 401(k)s.
A SEP (simplified employee pension) IRA has contribution limits that are similar to a 401(k). You have to be self-employed to set up a SEP IRA but, using a SEP, you can contribute up to 25 percent of your income or $55,000, whichever is less. This can allow small business owners to increase their annual retirement savings greatly over other IRA alternatives and help them avoid running out of money in retirement.
SEP IRAs are very high contribution limits but, they’re also less flexible than many other retirement accounts. If you start a SEP for your business, you must also fund contributions for all of your employees that are proportional to your own contributions based on annual compensation. This makes SEPs ideal for self-employed individuals or small business owners with few or no full-time employees.
To learn more about SEP IRA rules and how to set up an account, visit our ultimate guide to SEP IRAs.
A SIMPLE IRA is structured almost like a 401(k) but without the administrative costs. SIMPLE IRA contribution limits are $25,000 between employee deferrals and employer matching, which is lower than 401(k)s or SEP IRAs.
SIMPLE IRAs provide a big advantage for employees because, unlike a 401(k), employer matching isn’t an option. Employers are required to match employee contributions up to 3 percent of employee compensation. If you have access to a SIMPLE IRA at work, you should definitely participate to help build your retirement savings through employer matching.
Our ultimate guide to SIMPLE IRAs can provide additional information on how SIMPLE IRAs work, account rules and deadlines.
A traditional IRA is the easiest, most straightforward and cost-effective retirement plan available. Traditional IRAs are not employer-sponsored retirement plans. Instead, anyone who’s eligible can set up an account on their own and make up to $5,500 in contributions — $6,500 if you’re age 50 or older — each year.
Although the contributions are lower than other plans, you should consider using a traditional IRA if you don’t have a retirement plan at work or have recently started your own business and aren’t yet very profitable. You may also be able to use a traditional IRA if have a retirement plan at work but aren’t maximizing your contributions and want to start a separate.
To learn more about IRA eligibility, account rules and how to use an account, be sure to visit our ultimate guide to Traditional IRAs.
A Roth IRA is very similar to a Roth 401(k) except the contribution limits are far lower. Like a traditional IRA, Roth IRA contribution limits are just $5,500 per year, plus another $1,000 if you’re age 50 or older. These contributions aren’t tax-deductible. However, your account grows tax-free, and you can withdraw money tax-free during retirement.
Using a Roth IRA can be more difficult than many of the other accounts listed here. In order to contribute to a Roth IRA, you must meet certain Roth IRA income limits that are set by the IRS. If your income exceeds these limits, you may not be able to contribute. If you’re eligible to contribute, however, a Roth IRA is a great tool for saving money that can be withdrawn tax-free during retirement.
For more information on Roth IRA income limits and how these accounts work, check out our ultimate guide to Roth IRAs.
A solo 401(k) is a 401(k) plan that has just one participant — the business owner. Using a solo 401(k), a business owner is allowed the same high contribution limits as a typical 401(k) without all of the administration requirements. Solo 401(k) plans aren’t typically required to file Form 5500 and also offer greater investment flexibility than traditional 401(k) plans.
If you’re a small business owner who has no full-time employees who are eligible for retirement benefits from your company, a solo 401(k) is an ideal option. With a solo 401(k), you can make up to $55,000 per year in tax-deferred contributions. You can also invest in real estate and other assets that aren’t allowed in traditional 401(k) plans.
To learn more about what solo 401(k)s are, their rules and how they work, be sure to visit our ultimate guide to solo 401(k)s.
Tips to Maximize Retirement Contributions
This retirement savings calculator above can be used to illustrate a number of important tips, including the importance of contributing to a retirement account at a young age. In addition to starting early, there are a number of other tips to help maximize your retirement contributions and avoid running out of money in retirement.
1. Maximize Plan Contributions in Early Years
The most important thing you can do to maximize your retirement savings is to contribute as much as you can as early as you can. If you start saving early, you can take advantage of compound interest, allowing your account to earn returns not just on your early contributions but also on your interest from previous years.
2. Invest Aggressively Early
When you’re a young investor, you have time to recover from volatility in your investments. By investing aggressively early on you can try to earn better returns, which provide a boost to your retirement savings and will leave you with more savings at retirement. You can see the impact of aggressive investing by raising the expected annual return in the retirement savings calculator.
3. Make Roth Contributions in When You’re Eligible
Roth IRAs and 401(k)s allow for tax-free withdrawals during retirement. If you meet eligibility requirements including Roth IRA income limits, you should consider contributing to a Roth account once you’re contributing regularly. Roth accounts allow for tax-free withdrawals during retirement, which means your retirement savings won’t decline as quickly when you start taking withdrawals.
Because of Roth IRA eligibility restrictions, many people use Roth IRA in early years when their income is lower. This is also an option and allows you to save money that can grow tax-free for a long time before being withdrawn tax-free in retirement.
4. Make Catch-up Contributions
Once you reach 50 years of age, you are allowed to make catch-up contributions that vary based on your retirement plan. If you’re older than age 50, be aware of these catch-up contribution limits for your plan and be sure to take advantage of them. Catch-up contributions can provide a last-minute boost to your retirement savings before you retire and may mean the difference between having enough saved for your retirement and running out of money.
If you’re self-employed or a small business owner, it’s important to use a retirement plan that will allow you to maximize your retirement savings. If you’re trying to decide what type of retirement plan is best for your small business, be sure to visit our ultimate guide to the Best Small Business Retirement Plans.
The Bottom Line
A retirement calculator is an excellent tool for forecasting the value of your retirement savings in the future. Using the retirement savings calculator above, you can track your account value based on expected annual contributions and withdrawals. You can also anticipate when you may run out of money and determine whether you’ve saved enough for retirement.
If you’re looking for a diversified financial services firm that can help you invest your retirement savings, be sure to check out TD Ameritrade. Using TD Ameritrade, you can get individual guidance for investing your retirement account at work, invest on your own and also get help with day-to-day banking needs. If you want help investing for your retirement, be sure to visit TD Ameritrade.