Fill in your current age, the age you want to retire and the age you want your money to last until. Then add what you have saved so far, how much you put away each month and the yearly return you expect before and after retirement. The inflation box lets you account for rising prices, which quietly raises the cost of living every year.
For spending, enter the yearly amount you would like to live on, measured in today’s money. If you expect a pension or other steady income, put that in the optional box and the tool will only ask your savings to cover the rest.
When you press Calculate, you will see what your savings may grow to by retirement and how much you need to fund your plan. If there is a gap, the tool shows how much more you would need to save each month to close it. If you are ahead, it shows your surplus. Try adjusting the retirement age or the monthly saving to see which change helps the most. These are estimates, since real returns and prices never move in a straight line.
Savings at retirement = current savings x (1 + r) raised to n, plus monthly saving x ((1 + r) raised to n – 1) / r. Here r is the monthly return and n is the number of months until retirement.
The yearly spending is raised by inflation up to the retirement age. The savings needed is the present value of all withdrawals during retirement, where each withdrawal grows with inflation and your money earns the retirement return. The shortfall is that amount minus your projected savings, and the extra monthly saving is the shortfall x r / ((1 + r) raised to n – 1).