Annual income you would need if you retired Example You Current annual income $30,000 Your income replacement ratio x80% 80 85 90 95 100 Replacement Ratio What percent of your annual income will you need each year you are retired? Estimated income need $24,000 (a) (a) Retirement income you expect to receive (annual amounts; don’t count income from personal savings and investments) Social Security $8,000 Employer’s pension $0 Other income $5,500 Total income from other sources $13,500 (b) (b) Annual retirement income needed from personal savings and investments Subtract (b) from (a) $10,500 Inflation Factor (example assumes 25 years to retirement) x2.09 5 10 15 20 25 30 35 40 Inflation Factor How many years until you retire? * Income needed from savings/investments $21,945 Total amount of personal savings and investments needed by retirement Income from savings/investments (above) $21,945 Payout Multiplier (example assumes a 20-year retirement period) x14.88 10 15 20 25 Payout Multiplier How many years will you be in retirement? The multiplier assumes a 3 percent after-inflation annual return. Your returns will differ. Targeted total savings/investments $326,542 (c) (c) Future value of any assets you now own that may be available for retirement Value of assets today $40,000 Growth Factor (example assumes 25 years to retirement) x4.29 5 10 15 20 25 30 35 40 Growth Factor How many years until you retire? ** Value of assets at retirement $171,600 (d) (d) Amount you should save each month from now until retirement to reach your targeted total Difference between (c) and (d) $154,942 Savings Factor (example assumes 25 years to retirement) ÷54.86 5 10 15 20 25 30 35 40 Savings Factor How many years until you retire? ** Amount you should save each year in your employer’s plan $2,824 Amount you should save each month in your employer’s plan $235 Note: If this amount seems high, don't be discouraged. Remember, this is the monthly amount. You still need to divide this by the number of pay periods in one month. You may have to start your savings program with a smaller amount and increase it over time. * A 3 percent inflation rate is assumed. Actual inflation will be different. ** A 6 percent investment return is assumed. Future investment returns cannot be predicted, and your actual returns and principal value will differ.