Planning for your retirement is important, but can be complicated. There are so many factors to take into account that it can be challenging to ensure that you are on the right track. It’s essential to have a plan in place to make sure you have a suitable retirement nest egg. An easy way to prepare is with a retirement nest egg calculator.
Fortunately, there are many online tools available to help you. These tools can take all relevant factors into account and create algorithms to simplify the data for you. That way, you can get a good estimate as to where you stand right now in your savings and how far you have to go to get the result you desire.
A nest egg is money that you have set aside for a specific purpose in the future—in this case, your retirement. Here, you can use our retirement nest egg calculator to help you adequately build that nest egg to meet your retirement goals.
How Does a Retirement Calculator Work?
By simplifying a lot of complicated factors, it will take your current information and give you an estimate of where you stand and what you need to change to reach your retirement goals.
The calculator will want to know just five key factors about you—your age, when you plan to retire, how much you have already prepared in savings, how much you are setting aside for your savings, and how much interest your investment is making.
Just plug in this basic info and you can get a great idea of how much money you will retire with according to your current plan. While some factors, such as your investments and interest rate, may change over time, this calculation can give you a decent idea of where you stand and what you need to do.
You may find that your current plan is not setting you up for the retirement budget you desire. If this is the case, try playing around with the figures to see if finding a higher interest rate, retiring later, or increasing your monthly investment can get you on track.
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How Much Do I Need to Save For Retirement?
A basic rule of thumb is to plan to replace at least 70% of your current income. Investments, savings, and Social Security can help you cover that percentage. You can also consider part-time work, rental income, or similar methods to supplement as needed.
Remember that your post-retirement income needs will be different from what they are pre-retirement. Medication and health expenses will likely be greater, but chances are that you will have paid off some large expenditures like your mortgage or car payments that are eating into your current budget.
Also, once you are in your retirement, you will no longer be allocating a portion of your finances to retirement savings. So, that amount of income will no longer be a draw on your resources. Your auto expenses may be less if you do not travel as often for work or pleasure, and taxes will likely be lower as you aren’t facing payroll deductions.
With these savings in mind, you may decide that you can do with less than 70% of your income in retirement. But this will ultimately depend on your desired lifestyle. If you plan to travel, rent a cottage, or take up expensive hobbies like golf in your retirement, you can raise that percentage to accommodate your planned retirement lifestyle.
Evaluating Your Retirement Score
If you’ve used the calculator and are not satisfied that you’re on track for the retirement nest egg you want, there are actions you can take to improve your situation.
Falling Short of Your Goal
If you are falling short of your retirement nest egg goals, you may want to consider smarter investment types that can help you get ahead.
Individual retirement accounts are very popular because they can help you better prepare for retirement while offering fantastic tax advantages. You can typically put in up to $6,000 a year, but if you are at least 50 years old, you can invest $7,000.
Whether you decide to take this route or not, you should evaluate your options and your current finances to devise a plan that can get you back on track with your savings.
Almost Meeting Your Goal
Suppose you are close to where you need to be for your retirement nest egg. In that case, this is your opportunity to consider whether there’s something you can do to accelerate the process or prepare for an even better retirement by modifying your goals.
One option is to inquire about any 401(k) plan your employer has and consider taking advantage of the company matching retirement dollars.
You can maximize the benefit by contributing as much as your employer is willing to match. You could even raise your contribution as far as the 401(k) limit if you can comfortably maintain it. A traditional 401k calculator can help you crunch the numbers.
Considering the potential advantages of a retirement annuity vs. 401K? That is a valid option as well. The difference is that a 401K is a long-term savings vehicle while an annuity is a long-term income facilitator. Research both options and determine which suits your preference.
Saving additional money will ensure that you meet your goal, even if the predicted values you used in your calculations are off. Plus, if you exceed your goals, you will have even more financial support during your retirement.
I’m Good to Go, But I Want More
If you seem on track to meet your goal or go beyond building a suitable retirement nest egg, but you want to know what else you can do to take your retirement to another level, consider consulting a financial advisor to consider different options and plans.
You know you’re going to be taken care of, but why not fully enjoy the fruits of your labor when retirement comes knocking? You could even consider early retirement if your finances are in good order.
Mandatory Retirement Age Pros and Cons
How soon you reach your safe retirement income will determine how quickly you can safely retire without financial worries. Here are some benefits and detriments to retiring at mandatory retirement age.
Pros
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- Health Benefits – Having escaped from the rat race, you can spend time sleeping and performing activities to improve your health.
- Travel – You will have the time to go to all those places on your bucket list.
- Dream Job – You could retire to change one job for something else you’ve always wanted to do but never had the time. Run your own business or pen that novel you’ve always wanted to write.
Cons
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- Less Social Security Benefits – Fewer years to input equals less output.
- Lifestyle Challenges – Some people find themselves listless or have trouble transitioning to such a different lifestyle, which can cause a decline in mental health. You will also need to find health insurance.
- More Enduring Savings – The earlier your retire, the longer your savings need to last.
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