What are the key inputs, and how does each input impact PlanEasy's retirement calculator’s answer?
About You
Age Today: This is how old you are today. The younger or further away you are from your target retirement age, the more time your investments/savings will have to grow and compound year after year until you retire (i.e. the value of your savings will be higher at retirement).
Amount Saved So Far: This is the amount of investments/savings you’ve got so far. The higher this starting point is, the higher the value of your investments/savings will be when you retire, allowing you to spend more during retirement.
Additional Amount Saved Yearly: If you are contributing additional funds to your savings each year, the amount you have saved up by the time you retire will be even higher, as the compounding or growing of your investments/savings will be amplified.
Retirement Goals
Retirement Age: This is your target retirement age, when you stop receiving steady income from your job and have to dip into your retirement savings (and other new sources of retirement income, such as pensions, annuities or Social Security checks). The longer you wait for retirement, and assuming your retirement portfolio keeps growing, the more you’ll be able to spend on living expenses during your retirement.
Retirement Budget Yearly: This is how much you expect or wish to spend per year during your retirement; the implied monthly retirement budget is also shown. The lower this retirement budget is, the sooner you will be able to retire, all else being equal.
Other Key Assumptions
Life Expectancy Age: This is the age to which you will live. The longer you live, the more you need saved up to fund your longer retirement.
Social Security Start Age: The earlier you start collecting Social Security benefits, the sooner you will be able to retire, assuming the same dollar amount of Social Security benefits. In reality, you may get higher Social Security benefits by delaying your Social Security start date. The Social Security Administration (SSA) states: “Social Security retirement benefits are increased by a certain percentage for each month you delay starting your benefits beyond full retirement age. The benefit increase stops when you reach age 70.”
To estimate what amount of Social Security benefits you may get, you can try out the Social Security Quick Calculator provided by the Social Security Administration, linked here.
Social Security Benefits Yearly: This is how much you expect per year to receive in Social Security benefits; the implied monthly amount of Social Security benefits is also shown. The lower this retirement budget is, the sooner you will be able to retire, all else being equal.
Inflation % Per Year: This is the amount of future inflation that you’re assuming. Your input for “Retirement Budget Yearly” described above is growing every year in our retirement calculator at this rate of inflation; in other words, what you think is your retirement budget today in dollars will likely be higher in the future due to inflation. From 2000 through the end of 2022, inflation (not seasonally adjusted) has been roughly ~2.5%, per the Bureau of Labor Statistics data series “CPI for All Urban Consumers (CPI-U).”
Investment Return % Per Year: This is the annual growth of your investments. From 1973 through the end of 2022, the compounded annual return (including dividends) in the stock market benchmark S&P 500 Index has been approximately ~10.24% per year, per NYU Professor Aswath Damodaran data series “Historical Returns on Stocks, Bonds and Bills: 1928-2022”. Per this same data source, the compounded annual return for corporate bonds rated medium-grade (Baa by rating agency Moody’s) from 2013 to 2022 has been roughly ~3.45%.
Will you be able to retire? Find out: Retirement Calculator