Plan your retirement savings and income needs
Your annual 401(k) or IRA contribution
Percentage of your contribution matched by employer
Income needed per year in retirement (today's dollars)
Annual Social Security benefits
Pensions, rental income, part-time work, etc.
Expected annual return before retirement
Expected annual return during retirement
Expected annual inflation rate
Retirement planning is the process of determining retirement income goals and the actions necessary to achieve those goals. It involves identifying sources of income, estimating expenses, implementing a savings program, and managing assets and risk.
The key to successful retirement is starting early and taking advantage of compound interest. Even small contributions made consistently over time can grow into substantial retirement savings.
The 4% rule is a widely-used guideline for determining a sustainable withdrawal rate in retirement. It suggests that you can safely withdraw 4% of your retirement savings in the first year, then adjust that amount for inflation each subsequent year, with a high probability that your money will last 30 years.
For example, if you have $1,000,000 saved, you could withdraw $40,000 in the first year. If inflation is 3%, you'd withdraw $41,200 the next year, and so on.
An employer match is when your company contributes additional money to your retirement account based on your own contributions. This is literally free money and one of the best ways to accelerate your retirement savings.
For example, if your employer offers a 50% match on contributions up to 6% of your salary, and you earn $75,000: if you contribute $4,500 (6% of salary), your employer adds $2,250. That's an immediate 50% return on your investment!
Inflation erodes purchasing power over time. What costs $60,000 today will cost significantly more in 30 years. This is why we calculate inflation-adjusted income needs - you need to save more to maintain the same lifestyle in the future.
$60,000 today = $145,000 in 30 years
$60,000 today = $194,000 in 30 years
It's common to assume different return rates before and after retirement. Before retirement, you typically invest more aggressively for higher returns. After retirement, most people shift to a more conservative allocation to preserve capital.
A well-diversified retirement plan includes multiple income sources to reduce reliance on any single source and provide more stability.
Your 401(k), IRA, and other investment accounts
Government-provided retirement benefits based on your work history
Pensions, rental income, part-time work, annuities