How it works

A useful distinction

Fixed outside income leaves a growing gap

In the salary-growth mode, give spending positive inflation but keep other retirement income growth at zero. The amount your savings must cover widens over time even when that outside income continues arriving every year.

Connecting a retirement target with savings

Start by distinguishing the balance you want at retirement from the income you want after retiring. The available modes connect savings, salary-based contributions, withdrawals, and duration under their stated assumptions. Check how inflation is handled before comparing future amounts with today's spending. Testing several contribution and return assumptions can show which parts of the plan depend most on uncertain inputs.

Retirement savings target: formula and assumptions

Required capital is the present value of future withdrawals, growing with the spending-increase assumption.

Payments are annual at year end. The model does not account for market volatility or sequence-of-returns risk.

Monthly savings needed: formula and assumptions

Contribution = [target−current balance×(1+i)^n] / [((1+i)^n−1)/i].

Contributions occur at month end. A result of zero means existing savings reach the target under the assumptions.

Withdrawal amount: formula and assumptions

Payment = balance×i/[1−(1+i)^−n].

This mathematical drawdown assumes fixed returns and ends at a zero balance. It is not an insurer's annuity quote.

How long will it last?: formula and assumptions

Solve balance = payment×[1−(1+i)^−n]/i for n.

Withdrawals are fixed and occur at month end. Returns are constant and exclude fees and tax.

Salary growth & income-based retirement: formula and assumptions

Accumulation grows the balance then adds salary-based saving. Required capital discounts each future net withdrawal.

Income-based need uses current income, then inflation to retirement once. The retirement spending model uses year-end withdrawals and independently growing other income.

Worked example

Reference example currency: USD. These fixed examples do not change with your calculator preferences.

Using the Retirement savings target example:

Inputs

Annual retirement spending ($): 60000
Other annual retirement income ($): 20000
Years in retirement: 30
Annual effective return (%): 5
Annual spending increase (%): 2.5

Method

Required capital is the present value of future withdrawals, growing with the spending-increase assumption.

Result

Example result

Estimated capital needed: $823,472.26

First-year portfolio withdrawal: $40,000.00

These are illustrative inputs. Change the values to explore a different scenario.

What to keep in mind

Constant returns and spending assumptions are scenarios. The salary-growth mode uses year-end savings and withdrawals, clips surplus other income rather than reinvesting it, and shows negative balances as unmet funding needs.

Formula references

References explain the underlying methods; they do not imply endorsement or individual professional review of Finflo.

Common questions

Does an income-based retirement need use my final salary?

In Salary growth & income-based retirement, the need is a share of current income, inflated to retirement once. Savings based on salary grow separately with each year’s modeled income.

What does a negative projected retirement balance mean?

It marks spending the modeled resources cannot fund. It is not a prediction that an investment account can continue making those withdrawals.

Does the target include market volatility?

No. Constant return assumptions do not model volatility or sequence-of-returns risk.

Prepared by Finflo. See our methodology and editorial policy. Read the relevant professional-advice limitations.

Retirement Calculator

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