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Retirement #3 – Version
9/99
All Data Entry cells show up in red.
In retirement, your income will most likely come from several different
sources; investment income, pension, social security, and possibly another
source. Most of these you will not have much control over at this point of your
life. The one you can have the greatest influence over is your investment
income. This calculator helps you calculate how much money you will need to save
to generate the investment income you will need to meet your investment goals.
Data Entry:
Annual Retirement Income Needed: Enter in today’s dollars the amount of
annual income you want to created for each of your retirement years.
Assumptions:
Current Savings: Enter here the total dollar amount of investments you
have that are set aside for retirement.
Current Age: self-explanatory.
Retirement Age: Enter the age at which you plan to retire.
Years until Retirement: This number is calculated for you.
Years Needing Retirement Income: If you plan on retiring at age 65 and
you expect to need retirement income until age 95, enter 30 here. (Total number
of years between 65 and 95)
Investment Return before Retirement: Enter here the investment rate of
return you want to assume you will achieve prior to retirement.
Investment Return after Retirement: It is possible that you may become a
more conservative investor after you retire. This entry and the one above,
allows you the flexibility to assume one investment return before retirement and
a different on after retirement.
Inflation Assumption: Enter here the inflation you think we will
experience on average in the future. This will increase the income you will need
to meet future purchasing power demands. 3-4% is a reasonable entry here.
The calculator then outlines the investment lump sum needed at the beginning
of your retirement years to generate the income that will be derived from
investments, for the specified number of years. The last number illustrated in
the model is the amount you need to be saving on a monthly basis to achieve the
goal. Keep in mind that this monthly savings requirement may partially be met
with employer matching dollars. |
