Below is a simple calculation of how much you will need to retire.
First, answer the following questions.
| Input |
| How much money do you have today? |
(1) |
________ |
| How many years do you have until you retire? |
(2) |
________ |
| In today's dollars, how much income do you need per year when you
retire? |
(3) |
________ |
|
How much passive income per year will you have during retirement?
- For example, from Social Security benefits, Pension, rents
- NOT including income from investments such as dividends
|
(4) |
________ |
Then, use the answers you have input above (which will be
referred to as (1), (2), and (3)) to calculate what you will need for retirement
using the following guideline.
| |
Calculate |
|
|
|
Income needed during retirement (adjusted for inflation of 3%)
|
(3)x(1+3%)^(2) |
(5) |
_______ |
|
Additional income needed during retirement
|
(5) - (4) |
(6) |
_______ |
|
Principal investment needed to achieve income level needed
(3) assuming rate of return of 7% (Actual required rate of return =
7% - inflation = 4%)
|
(6) / 4% |
(7) |
_______ |
|
Short Fall |
(7) - (1) |
(8) |
_______ |
| Additional Principal Needed NOW |
(8) / {(1+7%)^(2)} |
(9) |
_______ |
