A nest egg is the money you save for retirement. It helps you live comfortably when you stop working. But how do you know if your savings will last? This is where nest egg calculators come in.
These tools help you estimate how long your savings will support you. They also show how much you can safely withdraw each year. A retirement nest egg calculator can help you can plan better for the future.
What Is a Nest Egg Calculator?
A nest egg calculator is a simple tool that helps you plan for retirement. It shows how long your savings will last based on your spending and investment growth. It looks at your savings, withdrawal rate, and expected returns.
While helpful, they won't give you an in-depth look at all your sources of income nor can it accurately predict the future. Working with a retirement financial planner gives you a better overview of where you are.
4 Types of Nest Egg Calculators
There are different types of nest egg calculators. Each one helps you with a specific part of retirement planning to address different concerns.
1. General Retirement Nest Egg Calculators
These are the most common nest egg calculators. They give a general estimate of how much you should be saving monthly and what your ideal target for retirement should be. The calculator shows if you’re on track or need to save more. These are some examples of nest egg calculators:
- Vanguard retirement income calculator: This is ideal for those who want a simplified approach to calculating their retirement income.
- AARP retirement nest egg calculator: If you want a more comprehensive look at you nest egg then choose this one. You can adjust and modify more factors to get a clearer picture.
2. “How Long Will My Nest Egg Last?” Calculators
A “how long will my nest egg last?” calculator focuses on time. This is great if you have a rough idea about how much you currently have saved and need to do a quick check. It tells you how many years your savings will last based on your withdrawals and investment growth.
It’s helpful if you already have savings and want to plan your spending. These are two good examples:
- CNN Business: This is a straight-forward calculator that tells you how long your income will last in years.
- Nerd Wallet: This is a simpler version of this calculator.
3. Nest Egg Withdrawal Calculator
Nest egg withdrawal calculators help you figure out how much you can safely withdraw each year. It considers your total savings, expected returns, and retirement years. It ensures you don’t spend too much too quickly. These are two nest egg withdrawal calculators you can use:
- BuyUpside nest egg withdrawal calculator: This lets you know your first withdrawal amount, last withdrawal amount and sum of all withdrawals.
- Wealth Meta retirement withdrawal calculator: This calculator uses historical data and your input to give a simulation of what to expect in your golden years.
4. Benefits Calculator
While this isn’t technically a nest egg retirement calculator, it’s a good way estimate your benefits. Some of the other calculators may need to you to estimate what you will receive from your Social Security benefits or pension:
- Social Security quick calculator: This is a simple way to get an estimate of your potential benefits.
- Pension calculator: This lets you choose between a lump sum payment or monthly pension payment with this calculator.
Factors that Affect Nest Egg Calculations
Several important factors impact how long your nest egg will last. Here’s what each factor means in plain terms.
1. Current Age
Your current age is the starting point for retirement planning. It helps determine how many years you have left to save for retirement. It's never too early or too late to start making a plan for personal finance.
2. Age at Retirement
This is the age when you plan to stop working. The earlier you retire, the longer your savings need to last, keep that in mind. Also consider your benefits, retirement accounts, RMDs, and health when setting your retirement age.
3. Annual Household Income
This is the total amount of money your household earns each year. It helps estimate how much you can save for retirement.
4. Current Retirement Savings
This is the total amount of money you’ve already saved for retirement. It includes savings accounts, investments, and retirement plans like a 401(k) or IRA.
5. Expected Income Increase
This is the percentage your income is expected to grow each year before retirement. For example, if you get a 3% raise every year, your income will gradually increase.
6. Pre-Retirement Income Desired in Retirement
This is the percentage of your income you’ll need in retirement. It’s based on your household income right before you retire. You might need as little as 40% or as much as 160%.
- If most of your retirement savings are not in tax-deferred accounts, use after-tax amounts.
- A lower percentage means you’ll spend less, while a higher percentage means you’ll maintain your current lifestyle.
7. Years of Retirement Income
This is how many years you expect to use your savings after you retire. For example, if you retire at 65 and expect to live until 90, you’ll need 25 years of income.
8. Rate of Return Before Retirement
This is the annual return you expect from your investments while you’re still saving. A mix of stocks, bonds, and other investments can grow your savings.
9. Rate of Return During Retirement
This is how much your savings are expected to grow each year after you retire.
- If your money is in a 401k, IRA, or other tax-deferred accounts, you may get a higher return.
- For example, the S&P 500® has historically had an average annual return of about 10.26% since 1957 (including dividends).
10. Expected Rate of Inflation
Inflation makes things cost more over time. For example, something that costs $100 today might cost $103 next year with a 3% inflation rate. The long-term average inflation rate is about 3% annually.
11. Income from Benefits
Social Security income is the monthly amount you’ll receive from the government during retirement. This income reduces how much you need to withdraw from your savings. Also, pension is another aspect to consider.
12. Annual Withdrawal in Retirement
This is how much you plan to take out of your savings each year. A common rule is the 4% rule, which means withdrawing 4% of your total savings annually. Taking out too much too soon can make your savings run out faster.
Personalize Your Retirement Plan
A retirement nest egg calculator is not a replacement for in-depth financial analysis. Get personalized advice from qualified retirement planners.
Work with a trusted team today!
Stewart Willis is the founder and president of Asset Preservation Wealth & Tax, a financial planning firm in Phoenix, Arizona. Investment advisory services offered through Foundations Investment Advisors, LLC, an SEC registered investment adviser.
The commentary on this blog reflects the personal opinions, viewpoints and analyses of the author, Stewart Willis, providing such comments, and should not be regarded as a description of advisory services provided by Foundations Investment Advisors, LLC (“Foundations”), an SEC registered investment adviser or performance returns of any Foundations client. The views reflected in the commentary are subject to change at any time without notice. Nothing on this website constitutes investment, legal or tax advice, performance data or any recommendation that any particular security, portfolio of securities, transaction or investment strategy is suitable for any specific person. Personal investment advice can only be rendered after the engagement of Foundations for services, execution of required documentation, including receipt of required disclosures. Any mention of a particular security and related performance data is not a recommendation to buy or sell that security. Foundations manages its clients’ accounts using a variety of investment techniques and strategies, which are not necessarily discussed in the commentary. Any statistical data or information obtained from or prepared by third party sources that Foundations deems reliable but in no way does Foundations guarantee the accuracy or completeness. Investments in securities involve the risk of loss. Any past performance is no guarantee of future results. Advisory services are only offered to clients or prospective clients where Foundations and its advisors are properly licensed or exempted. For more information, please go to https://adviserinfo.sec.gov and search by our firm name or by our CRD # 175083.
