Desktop-retirement-calculator

Retirement Calculators 101

Updated November 1, 2019 . AmFam Team

It can be difficult to understand how much to save for retirement when it’s a while away. Retirement calculators can be helpful tools to prepare for long-term savings.
When it comes to saving for your future, retirement may be the last thing on your list. After all, there’s saving for a house and paying off your student loans to worry about! But it’s never too early to start planning for retirement. The question is, how can you really know how much to save? A retirement calculator just may help you find the answer.

Retirement savings calculators are digital tools meant to help you estimate the future value of your current retirement savings, and give you a good idea of how much more you need to save each month to reach your retirement goals. Some tools will have you fill in basic numbers to give you a snapshot of what your plan could look like in just seconds, others are more interactive, allowing you to input more detailed information to come up with multiple savings scenarios. Which one you use depends on your personal preference — and we’re here to help you figure that out!

How Much Money Should You Have When You Retire?

Now on to the natural next question: ‘how do I know how much money I’ll need for retirement?’ The answer can vary drastically based on your income, cost of living and spending habits. But, in short, it depends on how you want to live out those years of your life. While there’s no magic number detailing exactly what you should save, a retirement savings calculator can take a wide variety of factors into account, helping you determine your savings goals.

How Do Retirement Calculators Work?

No two retirement savings calculators are created equal. Each one takes different variables into account to best estimate how much you should save monthly to be on-track for your goal retirement age. But most retirement calculators will ask for your age, income, savings balance and how much you’re currently saving each month. From there, they’ll take into account future factors like inflation, salary increase and rate of return on investments to come up with a recommended nest egg and monthly savings amount.

Before you get started using a retirement savings calculator, you may want to study up on some of these commonly-used terms.

Current savings. This is simply the amount you’ve currently got saved for retirement. Some people may have this money tucked away in a 401(k), others could have a separate savings account or an IRA.

IRAs. An IRA (or an individual retirement account) is an account with a financial institution that allows you to save for retirement with tax-free growth. There are three main types.

Market value of home. The market value is the estimated amount home buyers today would be willing to pay for your house. You can determine this by using estimators by companies like Zillow, but you’ll get the most accurate estimate by hiring a local home appraisal service.

Nest egg. A sum of money saved up for the future.

Pre-tax (or gross) income. Also called pre-tax dollars, this is your gross income before income taxes are withheld — contributions to your 401(k) or flexible spending account comes out of your pre-tax income. If you’re a salaried employee, you can typically find this information in your employee portfolio. If you earn an hourly wage, simply multiply that by the hours you work each week and multiply the total by 52 (but be sure to factor in any weeks you’ll take unpaid vacation, holidays or sick time).

Retirement pension. A pension is a retirement plan that requires an employer to make contributions to a fund set aside for the employee’s future benefit. Not all employers provide these types of plans so, to know if you’ve got one, take a look at your benefits resource or reach out to your HR team.

Social Security income. Social Security is essentially a trust fund administered by the government to retirees, disabled people and/or families of retired, disabled or deceased workers. It’s primarily funded by FICA payroll taxes that both you and your employer pay. You pay these taxes throughout your career so that you may one day be eligible to receive the benefits of this program.

401(k). A 401(k) is a company-sponsored retirement account that you, as an employee, are allowed to contribute to with your pre-tax income. Many employers also make matching contributions up to a certain percent, and you may also earn interest on your balance. Check out your employers benefits resource to learn about your options.

5 Best Retirement Calculators

Now that you’ve got a little background about how retirement savings calculators work, it’s time to choose the right one for you. The best tools should make crunching the numbers easy, and, for you visual learners, it may be best to use one that has a visual representation of how your savings will grow over time. Regardless of how you prefer to intake information, we’ve got a recommendation that’s sure to suit you. Check out our list of the 5 best retirement calculators.

1. Nerd Wallet Retirement Calculator

Nerd Wallet’s savvy tool takes age, pre-tax income and current savings into account to help you understand how much you will need to save in order to retire at 67. Using the information you enter, it graphically displays how much you’ll need for retirement, how much you’ll have if you continue on with your currently monthly savings and even gives you a retirement savings score. Not sure if 67 is the right retirement age for you? Or think you’ll need more monthly spending funds than their average estimate? You can easily adjust those fields and see the affect it has on your savings goal and your score.

2. Kiplinger Retirement Savings Calculator

The second tool on our list takes a few more factors into account, but it’s not overly complicated. The Kiplinger Retirement Savings Calculator asks questions like “how much income will you need in retirement?” “How much income will you receive from Social Security and Pensions?” and “how much will you draw from home equity?” and it gives you prompts to help you find the answers to those questions — ultimately providing a more comprehensive estimate of what your savings goals truly should be.

3. Financial Mentor’s Ultimate Retirement Calculator

What sets the Ultimate Retirement Calculator apart is that it allows you to account for inheritances you expect to receive before retirement and/or plan to leave behind for your family after your death. This calculator may be especially useful if you have children or wish to plan for a family in the future. It also asks for all the standard information, and allows you to adjust your allocations as you see fit. The easy-to-use table format is a major plus, too.

4. Fidelity Retirement Score Tool

Fidelity’s online retirement savings calculator gives you a snapshot of your retirement finances quickly. You answer six simple questions and are then served a retirement score that’s based on a “needs attention” to “on target” scale. From there, it prompts you to take advantage of their planning and guidance center to build a more concrete retirement plan that’ll set you up for success. It’s a great tool for those just starting to think about retirement planning.

5. Personal Capital’s Retirement Calculator

Finally, Personal Capital’s Retirement Calculator uses Monte Carlo analysis to run thousands of hypothetical return scenarios based on your linked investment accounts — no data entry required. From there, you’ll be taken to a dashboard that displays how your unique situation may play out. So, for those that are more advanced in their investment portfolio and want to dig in to a more complex savings calculator, this is the tool for you.

Whether saving for retirement is a new concept to you, or you’ve been searching for the right tool to help you plan for some time, you’re in the right place! Take a look at our suggested retirement calculators and start building a savings plan today.

Want to keep planning for the long-term? Learn about all the benefits of life insurance and discover your options by connecting with your American Family Insurance agent (Opens in a new tab). They can help build the right life insurance policy for your needs and help you protect what matters most.

This article is for informational purposes only and based on information that is widely available. This information does not, and is not intended to, constitute legal or financial advice. You should contact a professional for advice specific to your situation.

Related Articles

  • Family of four walking hand in hand down beach
    Family of four walking hand in hand down beach
    Ways to Save Money for a Family Trip

    Among the many joys of being a parent is the opportunity to share your passions with your children. From exploring your favorite hobbies to diving into cherished family recipes, as your kids grow so do the memories you create together.

    Going on vacation with your children is a great way to bond with them, but it can get costly. The good news is that getting out of town doesn’t have to break the bank. Plan for your next family adventure by exploring the tips in these family vacation FAQs.

  • Man using entering his credit card info into his cellphone.
    Man using entering his credit card info into his cellphone.
    Credit and Identity Theft Monitoring

    Protecting your home with a security system and locking your doors when you leave for the day are measures you might take to protect your home from intruders. Credit and identity theft monitoring are a type of “security system” that protects you from intruders gaining access to your personal information. From credit fraud to identity theft, everyone is susceptible to these types of breaches — that’s why it’s so important to defend yourself against them.

    Credit monitoring and identity theft protection are two different ways to proactively protect yourself if your personal information gets into the wrong hands. Let’s take a look at the differences and why it’s important to implement them both together.

  • Couple looking at housing prices
    Couple looking at housing prices
    Saving for a House

    There are a few defining moments in our lives. For some, it’s the realization that buying that first home is within reach, both financially and emotionally. It’s a big step, and it’s one that’s built into the American dream. And if you’re left wondering how much money you should save before buying a house, you’re not alone. These costs can add up quickly.

    After you’ve made the big decision to start shopping for a home, you might be surprised to find that coming up with the cash down payment is only one of several financial hurdles you’ll need to clear. Exactly how much you should save for a house depends on a number of factors, like the value of the home you’re targeting and the amount of money you intend on pushing into your down payment.

  • A white woman budgets for saving money using a calculator at a cafe.
    A white redheaded woman works on her budget for saving money with a calculator at a cafe.
    Pay Off Student Loans or Buy a House?

    After college, life moves fast. You get your first big job, move out of your parents’ house and start a whole new life on your own. For most people, this also means paying off student loan debt from your college tuition. Having this debt may make big milestones like buying a house seem far off, but there are ways to make the leap from renter to homeowner even if you have student loans. So can you get a mortgage while also paying off student debt? Or should you wait to pay it off before you buy a house?

    Every situation is different, so it’s important to do the right research and choose the best option for you. Luckily, we’ve done some of the breakdown for you to help you decide whether to pay off your student loan entirely or buy a house.

    Can Student Loans Affect Buying a House?

    Typically, student loan debt doesn’t prevent you from getting a mortgage. The biggest thing to note is that student loan debt does influence your debt-to-income ratio, which is a factor lenders consider before giving you a loan. It can also affect the interest rate you pay on your mortgage.

    Buying a house with defaulted student loans

    If you’ve defaulted on your student loans, it’ll be more difficult — but not impossible — for you to get a mortgage. Because defaulting negatively affects your credit score, lenders will be less likely to want to give you a loan or will charge a much higher interest rate on a loan.

    Getting a home loan with student loan deferment

    If you’ve deferred your student loans, this usually won’t affect your chances of getting a mortgage. Just be sure to consider how the future estimated payments will factor your debt-to-income ratio. Some types of mortgages may reject applicants with deferred loans, so do your research on the different types of mortgages before shopping.

    Should You Pay Off Student Loans Before Buying a House?

    Buying a house is expensive, there’s no doubt about that. It can seem smart to hold off on house shopping while you still have student loan debt, and it can be even more difficult to save for a house if you’ve got a high debt-to-income ratio. But if you have enough income to handle the payments for both, you may want to consider investing in your first home.

    Signs You Should Pay Off Student Loans

    When considering whether to pay student loans or save for a house, there are a few factors that can help you decide if paying off your student loans should be a priority.

    Your debt-to-income ratio is too high

    If the amount of money you bring in monthly or yearly is almost the same as the amount of money you pay out in debts — like student and car loans or credit cards — it may be best to pay down your debt before buying a house.

    You’ve defaulted on your loans

    Defaulting on your loans has a severe negative impact on your credit score, which tells lenders that you’re a bigger risk to take on. Work on improving your credit score before shopping for a mortgage.

    You’re struggling to make payments

    If you feel like you’re living paycheck to paycheck or struggling to make payments on your loan every month, it’s best to hold off on saving for a house. Need help keeping track of your student loan payments? Try our student loan payment tracker to get organized.

    You haven’t saved for a down payment or emergency fund

    Before you start picking out which houses you want to tour, you should take a look at your savings. If you don’t have enough for a 5 to 10 percent down payment or enough as an emergency fund for home expenses — like a broken dishwasher or damaged roof — take more time to put money away for your first home.