Retirement Calculator: Balance, Inflation and Monthly Income
Enter what you have saved, what you add each month, the yearly return and inflation you expect, how many years you will save and how many years the money must last in retirement.
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Formula
Monthly compounding with a deposit at the end of each month:
FV = P × (1 + r)^n + C × ((1 + r)^n − 1) ÷ r
Pis the current savings andCthe monthly contributionris the yearly return ÷ 100 ÷ 12nis the years × 12
At 0% return, FV = P + C × n.
Worked example
10,000 saved, 500 a month, 7% a year, 30 years:
r = 0.07 ÷ 12 = 0.0058333,n = 360,(1 + r)^360 = 8.116510,000 × 8.1165 = 81,164.97500 × (7.1165 ÷ 0.0058333) = 609,985.50- Total 691,150.47; contributed 190,000; growth 501,150.47.
Inflation and withdrawals
Convention used for the three extra results (all with the same yearly return, compounded monthly):
- Balance in today's money =
FV ÷ (1 + inflation)^years - Sustainable monthly withdrawal (future money): a level amount paid at the end of each month for
m = 12 × years of retirementmonths that uses the balance up exactly:W = FV × r ÷ (1 − (1 + r)^−m), orFV ÷ mat 0% return. The balance keeps earning the return while it is paid out. - Withdrawal in today's money =
W ÷ (1 + inflation)^years, deflated over the saving years only. Inflation during retirement itself is not modelled, so the later payments lose buying power.
Worked example with the defaults (inflation 2.5%, 25 years of retirement), FV = 691,150.47:
- Deflator
1.025^30 = 2.0976, so today's money balance is 329,500.93 m = 300,r = 0.0058333,W = 691,150.47 × 0.0058333 ÷ (1 − 1.0058333^−300) =4,884.91 a month- In today's money: 4,884.91 ÷ 2.0976 = 2,328.84 a month
Frequently asked questions
How is the retirement balance projected?
Interest compounds monthly and contributions are added at the end of each month: FV = P(1+r)^n + C((1+r)^n - 1)/r, where r is the yearly return divided by 12 and n is the number of months.
What return should I assume?
No return is guaranteed. Many planners test a few cases, for example 4%, 6% and 8%, and look at the spread. The return is applied both while saving and while withdrawing, before fees and taxes.
What does 500 a month grow to?
Starting with 10,000 and adding 500 a month at 7% for 30 years gives about 691,150 in future money. With 2.5% inflation that is worth about 329,501 in today's money, and over 25 years of retirement it could pay about 4,885 a month in future money, or 2,329 in today's money.
How does the calculator handle inflation?
Inflation does not change the nominal balance. It is used to deflate results back to today's buying power: balance ÷ (1 + inflation)^years. The monthly withdrawal is a level amount over your retirement years, then deflated the same way. Taxes and fees are ignored.
How is the sustainable withdrawal worked out?
The balance at retirement is treated as a loan paid out to you: W = B × r ÷ (1 − (1 + r)^−m), with r the monthly return and m the months of retirement. It would use up the balance exactly after the last month. At 0% return it is B ÷ m.