How Does a Retirement Calculator Work?

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Retirement calculators make the complex math of long-term financial modelling easy for everyone to understand and use. However, they can also be misleading if used incorrectly or for the wrong purpose.

The most common way a retirement calculator works is by providing an estimate of the amount a person can withdraw from their retirement savings each year in retirement. This is called a “safe withdrawal rate” because it’s designed to keep your income above the inflation rate so that you can avoid consuming too much of your retirement savings and depleting your portfolio. This link Exponent Investment Management

A good rule of thumb is that you’ll need to save at least 25 times the amount of annual spending that you plan on during retirement. This number accounts for a number of variables and unknowns, including how long you’ll live, what your future expenses will be and the growth rates of your investments.

Retirement Calculator: Plan for a Secure Future

Another variable that’s often forgotten is inflation. While most people believe that the current cost of living will remain relatively unchanged throughout their lives, the truth is that inflation will add a significant percentage to your retirement costs over time. Fortunately, our Retirement Calculator takes this into account and automatically includes it in several of its calculations.

It’s also important to consider how Social Security benefits will be impacted by inflation. Our calculator allows you to check a box to include Social Security benefits in the calculation and to specify whether you want the benefit to increase each year with inflation or to remain flat.

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