Retirement Investment Calculator
Estimated Balance at Retirement
Total Contributions
Compound Interest Earned
Planning Your Financial Freedom
Retirement planning is the process of determining your financial goals for life after work and calculating the steps necessary to reach them. The primary engine of a successful retirement plan is compound interest—the process where your investment returns begin to earn their own returns.
How This Calculator Works
The Investment Calculator for Retirement uses the future value formula for both a lump sum and an annuity. It assumes that contributions are made monthly and that the returns are compounded monthly to provide a realistic projection of your portfolio's growth.
Realistic Example:
If a 30-year-old starts with $5,000 and contributes $400 every month with an expected annual return of 7%, they would have approximately $722,810 by age 65. Of that total, only $173,000 came from their pocket—the rest is growth!
If a 30-year-old starts with $5,000 and contributes $400 every month with an expected annual return of 7%, they would have approximately $722,810 by age 65. Of that total, only $173,000 came from their pocket—the rest is growth!
Key Factors in Retirement Investing
- Time Horizon: The number of years until you need the money. Longer horizons allow for more aggressive asset allocation.
- Risk Tolerance: Your ability and willingness to lose some or all of your original investment in exchange for greater potential returns.
- The Rate of Return: Historically, the S&P 500 has returned about 10% annually before inflation. Many planners use 6-7% for conservative estimates.
- Inflation: Remember that $1 million today will have less purchasing power in 30 years. It is often wise to subtract 2-3% from your expected return to account for inflation.
Maximizing Your Growth
To reach your goals faster, consider utilizing tax-advantaged accounts like a 401(k) or an IRA. Many employers offer a "match" on 401(k) contributions, which is essentially a 100% immediate return on your investment. Increasing your monthly contribution by even 1% of your salary can result in six-figure differences over a 30-year career.