Simple savings calculatorBY Robert Graham
Simple savings calculator
You can experiment with savings goals and timing using our simplified interactive calculator. Over time, the US stock market has returned 6-7%. Completely “risk-free” returns as of this writing are between 2.5-3% for 1-5 year CDs and bonds. These interest rates should give you some idea what to try for your savings goals.
Check the table on the right to see your savings year by year according to what you input.
Use the inputs on the left to pick your starting amount, expected interest rate, number of years to save, and contribution per year. After thinking about a savings goal, try out the retirement calculator below!
Onward to the calculating!
Simple retirement calculator
The retirement calculator has the same layout as the savings calculator but it includes one major difference. It asks you for your desired income in retirement
You may want to adjust your retirement income upward for inflation depending on the number of years you’re looking down the road. You can use the savings calculator above to calculate an inflation adjusted figure. Enter the same number of years, a starting amount of your retirement income goal, an interest rate of negative 2-2.5%, and an annual savings of $0. See an example screenshot. The final amount is your inflation adjusted income amount. See below for more on inflation.
Wait, what’s inflation?
Most countries with central banks (like the US and Europe for example) have an inflation target for the currency. That means your dollar (for example) is worth a little less each year. The typical inflation targets are around 2% annually. Look at how 10 years of inflation will impact $50,000.
Getting started with savings and retirement goals
The next step is to have goals and a plan to achieve them. Use these calculators as a great starting point or place to check-in on an idea, but if you’re not budgeting and saving regularly then it’s going to be difficult to retire or meet any particular goals. Living without a financial plan is stressful. Check out our budgeting templates for a ton of ways to get started with budgets and planning for your financial future.
How much should I have in savings?
It depends! =)
Most people should have an emergency fund of 3-6 months expenses, but you might only have about one month or $1,000 if you’re paying off debt.
You may want to save for a child’s education or wedding or vehicle purchase, but that depends on your personal values, preferences, and circumstances.
Retirement savings will also depend on where you live and how much retirement income you think you will need. Someone planning to retire with no pension in Los Angeles and no owned residence will have very different needs than someone who owns a home and has a firefighter’s pension in Oklahoma.
We have an interactive retirement calculator that can help you experiment with the numbers and determine what might fit your needs.
How much does the average person have in savings?
According to CreditDonkey, of those with retirement savings:
The average household has $60,000 saved for retirement
The average 30 year old has $45,000 saved.
The average 40 year old has $63,000 saved.
The average 50 year old has $117,000 saved.
The average 60 year old has $172,000 saved.
What is a 529 college savings plan?
The 529 plan is a way to save for college that is tax free if spent for educational expenses. Typically, you can transition funds for one child or grandchild to another without penalty.
Each state manages their own specific options for investing in 529 plans and some are more favorable than others. Some people choose to invest in state 529s for states in which they do not reside. There are many reasons to do so including differences in contribution minimums, contribution limits, and state income taxes.
What’s the best way to save for retirement?
This is a complicated subject and varies both in the options available and the needs of different people begging the question.
The short version is that everyone should save as close to 20% of their income as possible after they’ve paid off non-mortgage debts. Employees with access to pensions (rare) may choose to save a bit less, but employees with access to a 401(k) should maximize savings in that vehicle if possible. IRAs, SEP IRAs, and Roth IRAs are all also great investment options for retirement where 401(k)s are either unavailable or already maximized.
Don’t let that be where you stop. Keep learning and developing better financial savvy. Investing in yourself is the best retirement investment you can make.