Your retirement nest egg is the total savings you’ll have to support your lifestyle after you stop working
*Please note that we do not offer loans. This calculator is for education purposes and to illustrate how loans work.*
Your retirement nest egg is the total savings you’ll have to support your lifestyle after you stop working. Careful consideration of multiple factors to arrive will help you plan for your retirement years and answer one crucial question: “How much money do I need?”
This guide will walk you through the process of determining your retirement number and offer pointers on using the calculator on the page.
Understanding Your Retirement Nest Egg
A retirement nest egg represents the total assets you’ll need to accumulate by retirement to generate sufficient income for your non-working years.
Retirement Nest Egg Calculator Key Factors
Working from the top of the auto loan calculator down, there are five factors:
1. Your Current Age
Your age today in years.
2. Anticipated Retirement Age
This is your targeted retirement age. Consider that you may want to tinker with this number in case you retire earlier or work longer.
- Early Retirement (before 65)
- Traditional Retirement (65-67)
- Delayed Retirement (after 67)
3. Current Retirement Savings
This is the amount you currently have saved across all accounts. 401(k) and Simple IRA accounts are common, but don’t forget to include checking, savings and brokerage accounts that you might use for cash flow during retirement.
4. Monthly Amount Invested
Consider these guidelines if you have not yet started saving:
- Target saving 15% of your gross income if starting in your 20s
- Target saving 20% if starting in your 30s
- Up the savings rate to 25-30% if starting in your 40s
- Save 35-40% if starting in your 50s
5. Annual Interest Rate (ROR)
This rate is determined by your aggregate asset allocation. For purposes of the calculator, figures in the 6% to 8% range are probably reasonable depending on your age. A comprehensive financial plan will offer more detail, including scenario analysis where the returns come out better or worse than the base case.
Retirement Nest Egg Calculator Outputs
1. Available At Retirement
This is the total amount you’re projected to have on the day you retire. It includes contributions (paid by you) and return on investment (growth from investing your dollars).
2. Number of Contributions
This is the length of time in months you’ll have contributed to your retirement from today through the day you retire.
3. Total Amount Invested
This is the amount of money you’ll have contributed to your retirement fund.
4. Return on Investment
This is the total amount of money you’ll have earned on your contributions.
Advanced Calculation Methods
Monte Carlo Simulations
For a more sophisticated approach, consider using retirement calculators that employ Monte Carlo simulations. These tools:
- Run thousands of potential market scenarios
- Account for market volatility
- Provide probability-based outcomes
- Offer confidence levels for your retirement plan’s success
We utilize Monte Carlo Simulations as a part of comprehensive planning with clients. It takes into account complexities that are unique to you and tests for sequencing risk (that is, you retired at the “wrong” time, right before a market plunge)
Required Minimum Distributions (RMDs)
If your retirement savings are in tax-advantaged accounts like traditional IRAs or 401(k)s, factor in Required Minimum Distributions starting at age 73:
- RMDs can affect your withdrawal strategy
- They have tax implications that impact your net income
- They may force withdrawals at higher rates than the 4% rule suggests
Building Your Nest Egg
Once you’ve calculated your target retirement nest egg number, create a retirement saving strategy:
- Maximize tax-advantaged retirement accounts (401(k)s, IRAs)
- Take full advantage of employer matching contributions
- Consider catch-up contributions if you’re over 50
- Develop an appropriate asset allocation strategy
- Regularly reassess and adjust your plan
Conclusion
Calculating your retirement nest egg isn’t a one-time exercise but an ongoing process. As your life circumstances change and you get closer to retirement, revisit your calculations and adjust accordingly.
While these calculations provide guidance, working with our team can help you create a personalized plan that accounts for your unique situation and goals. By understanding how much you’ll need and creating a strategic plan to achieve it, you can build a nest egg that provides financial security throughout your retirement years.
Can we help you with this Retirement Age Calculator?
For more than 47 years, we have collaborated with our clients in their investment decision making process as they pursue their long-term financial goals.
We are committed to keeping your goals, concerns and attitude about investing at the heart of your plan.
If you’re considering a large purchase, but want additional guidance and ready to experience our personalized investment approach and exceptional client service, contact Jason R. Clark, CFA at 949.424.1013 or jclark@kovitz.com.
