Similar to the calculation on the main page, in this calculation, you can
change some fo the assumptions such as inflation and investment return
required.
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, write down the assumptions you are comfortable with
using the table below.
| Assumptions |
| What is the rate of inflation you want to assume? |
(a) |
______% |
| What average return on investments are you comfortable with? |
(b) |
______% |
|
The rate of return which will be used in this calculation will be:
Your comfort level rate of return (b)- inflation (a) |
(c) |
______% |
Finally, you can use the answers you have input above (which will be referred to as (1), (2),
(3), and (4)) to calculate what you will need for retirement using the following
guideline.
| |
Calculate |
|
|
|
Income needed during retirement (adjusted for inflation of
(a)%)
|
(3)x(1+a%)^(2) |
(5) |
_______ |
|
Additional income needed during retirement
|
(5) - (4) |
(6) |
_______ |
|
Principal investment needed to achieve income level needed
(3) assuming rate of return of a% |
(6) / c% |
(7) |
_______ |
|
Short Fall |
(7) - (1) |
(8) |
_______ |
| Additional Principal Needed NOW |
(8) / {(1+b%)^(2)} |
(9) |
_______ |
