Taking care of your future self
Saving and investing is good, but it's important to set clear goals - how much will you need, and when? And it's most important when thinking about retirement. You want to make sure that you don't just invest, you invest enough. And how much is enough?
While the above calculator is very far from being a comprehensive retirement planning tool, it's designed to give you a general idea of how much you need to save and invest today, in order to build a solid financial foundation for the future.
Example
Take the calculator's own defaults: a 30-year-old with €10,000 already invested, retiring at 67, currently spending €2,500/month, assuming 3% annual inflation, a 3.5% withdrawal rate, and a 7% expected return.
By retirement, those same €2,500 of today's expenses become €7,463/month in inflation-adjusted terms - more than triple the current figure, purely from 37 years of inflation. To support that, you'd need a portfolio of €2,558,766 at retirement. Working backward from today's €10,000 head start, that means investing €1,227/month from now until then.
Take the calculator's own defaults: a 30-year-old with €10,000 already invested, retiring at 67, currently spending €2,500/month, assuming 3% annual inflation, a 3.5% withdrawal rate, and a 7% expected return.
By retirement, those same €2,500 of today's expenses become €7,463/month in inflation-adjusted terms - more than triple the current figure, purely from 37 years of inflation. To support that, you'd need a portfolio of €2,558,766 at retirement. Working backward from today's €10,000 head start, that means investing €1,227/month from now until then.
How to use it
Existing Portfolio - the value of any investments you already hold today.
Current Age / Retirement Age - sets your investment horizon.
Current Monthly Expenses - what you spend per month today, in today's euros.
Annual Inflation - by how much your expenses are assumed to grow each year. 3% is a conservative assumptions, meant to "stay on the safe side".
Withdrawal Rate - the percentage of your retirement portfolio you plan to draw down each year. A lower rate means a larger required portfolio, but a longer margin of safety against running out of money.
Annual Increase (%) - an optional expected step-up to your monthly investment amount over time, e.g. with salary growth.
Expected Annual Return - your assumed investment return during the years you're still contributing.
- Existing Portfolio - the value of any investments you already hold today.
- Current Age / Retirement Age - sets your investment horizon.
- Current Monthly Expenses - what you spend per month today, in today's euros.
- Annual Inflation - by how much your expenses are assumed to grow each year. 3% is a conservative assumptions, meant to "stay on the safe side".
- Withdrawal Rate - the percentage of your retirement portfolio you plan to draw down each year. A lower rate means a larger required portfolio, but a longer margin of safety against running out of money.
- Annual Increase (%) - an optional expected step-up to your monthly investment amount over time, e.g. with salary growth.
- Expected Annual Return - your assumed investment return during the years you're still contributing.
FAQ
What withdrawal rate should I use?
3.5-4% is a commonly cited range in retirement planning, based on historical research into how long a portfolio can sustain withdrawals without running out. A lower rate is more conservative - it requires a larger portfolio but leaves more room for market downturns or a longer-than-expected retirement.
Why is my required monthly expense at retirement so much higher than what I spend today?
Inflation compounds the same way investment returns do. Even a modest 3% annual inflation rate roughly triples the cost of living over a 37-year working career, which is why the target portfolio in the worked example above is so much larger than "25x your current annual expenses" would suggest.
What's the difference between this and the Goal Seek Calculator?
This calculator is built specifically for retirement - it factors in inflation-adjusted future expenses and a sustainable withdrawal rate. The Goal Seek Calculator is a more general-purpose tool for any fixed portfolio target, without the retirement-specific inflation and withdrawal modeling.
Does this account for other income in retirement, like the state pension?
No, it assumes your portfolio needs to cover 100% of your retirement expenses. If you expect meaningful income from the state pension, an employer's pension or rental income, your actual required monthly investment would be lower than what the calculator shows. See my post on the state pension for how little it typically covers on its own.
Is this financial advice?
Absolutely not - this is an illustrative tool to help you understand the scale of retirement planning, not a personalized recommendation. If you want a plan built around your actual circumstances, that's what financial planning is for.