Why save for retirement?
There are many reasons for avoiding saving for retirement. Many people in their 20’s think that retirement is an abstract concept that will only come to them after 40 or 50 years. In fact, the earlier you begin to think about it, the more comfortable your savings plan is. Here are the top reasons to start saving:
- Don’t rely on social security. Even if the estimate tells you that you will have a substantial retirement fund, remember that it can change (even multiple times) during your life. Additionally, you have no guarantee that the social security benefits will never be cut.
- You won’t have to rely on your children. You probably aren’t looking forward to be totally financially dependent on others. If you don’t create a savings fund, it may turn out that the only way you will be able to make it through is living with your children because you can’t afford your own flat.
- Every penny you save early will be worth many times more at the moment you retire. For instance, if you save $100 with a 5% yearly interest at the age of 25, it will be worth over $735 when you’re 65 (not taking inflation into account).
- You can get tax deductions. There are special accounts dedicated to retirement funds that make savings tax-deductible.
How to use our retirement income calculator
You need to input quite a low of information in our retirement savings calculator. Leave one of the boxes blank. The retirement calculator will find this value for you.
- Current age: your age at the moment you begin saving for retirement.
- Retirement age: it can be the regular retirement age in your country or the age at which you wish to retire.
- Savings amount: your monthly input to your personal savings account.
- Amount already saved: the account balance of your savings account prior to the moment you begin to save for retirement.
- Investment rate: the yearly interest rate. Deduct the inflation rate from the nominal interest rate to obtain the real value of your savings.
- Total savings: the total amount of money you will save from today up to your retirement day.
- Life expectancy: your life expectancy. You can either choose your country from the list (the data is taken from here) or input the value yourself.
- Social security: the monthly income that you’ll receive from social security.
- Retirement income: the total monthly retirement income – from both social security and your savings.
How much do I need to retire?
If you want to find out how much to save for retirement, you need to begin filling out the retirement calculator in a reverse order. Begin with the monthly retirement income you want to receive and the social security income you expect to get. Once you will set your life expectancy and current age, the retirement calculator will find how much you need to retire. You can then find the monthly savings you need to make or set them to a fixed value to discover whether you will be able to retire early.