AARP Budget Calculator

Brigitte Werfel September 24, 2020 Budget

Planning for retirement ? Here's five step process from ARP to consider define your retirement. Write your objectives down and think about these five goals, be specific practical, but leave room for dreams, take stock of your assets taking to account social security, pension savings and part time works. You can use your skills and even hobbies to earn income, know your benefits, calculate your social security and other retirement income. If you have a pension, know the rules for receiving upon retirement, if you have workplace savings such as a four o one k contribute to limit and know the tax rules. Create a budget, know how much money you have coming in, how much it will cost to support your retirement goals and how much debt you have. And last but not least, stick to your plan to use the AARP retirement calculator.

How Much You'll Need To Retire!

I'm gonna to show you an easy retirement calculator or at least what I think is the easiest one on the internet. Now the reason why I want to show you this is because so many people have the same question. How much money do I need to retire as the biggest question that we all want to know, and sometimes it can be tricky figuring out exactly how much you need, but luckily there's some pretty free and easy retirement calculators on the internet that we're going to dive into right now. So for the easy retirement calculator, it actually requires you doing two calculations, and you'll see why you're going to need to do both calculations in a couple of minutes.

We'll start with the retirement calculator from bank rate. So, why is it so complicated. Why can't i just say, oh, you need a million dollars. You need five million dollars to retire. Well, because depending on your age, your lifestyle, how long you're expected to live after retirement, all of these will come into play and everyone's different. You're someone who may want sixty thousand dollars a year to retire, maybe that's too much. You live somewhere that's much more affordable and you only need thirty thousand. Maybe you want to live a lavish lifestyle and you'd like to have a hundred and fifty thousand dollars during retirement.

Now another big factor is maybe only twenty years old and you have forty five years worth of your professional life ahead of you to invest in the stock market and build up your retirement account. Maybe you're a little older and you're fifty and you're watching this and you only have fifteen years left. That's going to be another variation. And then number of years after retirement. Some people want an early retirement and maybe they want to retire at the age of fifty and they hope to live till ninety. So, that's gonna be forty years. Maybe you're someone who plans on working till seventy and you still want to try to live to ninety. So, you only need twenty years worth of retirement. That's why all these come into play and you need calculators like this to figure that out.

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We'll do a pretty generic example. Let's say you think you want seventy five thousand dollars a year in retirement and that's in today's dollars. So, if you're retiring twenty, thirty, forty years down the road. This will account for inflation and all that lovely stuff. So, number of years until retirement, let's say you're thirty years old, uh, cause my average viewers around thirty years old and you want to retire at sixty five, so you got thirty five years until retirement.

How long do you want to live or how long are you expected to live. I know that's kind of a tricky question. But let's highball it cause it's always good to be conservative. What's it gonna live all the way to ninety five? That's thirty years worth of life after retirement. That would also be a great retirement annual inflation rate. So, if you're living in the united states, even those pretty high this year, on average, around three percent some studies will say a little higher. Some will stay a little lower.

I'm going to stick with three percent and then annual yield on balance. How much do you think you will make in the stock market or maybe you're invested in bonds, whatever it might be a combination of both will be conservative will say eight the stock market has returned ten percent a year over the past one hundred years on average, but we want to play a conservative. We're gonna say eight percent. We're gonna hit calculate and here's how much we will need will need three point four million dollars to retire and what's really nice is here's an amortization schedule of your beginning balance and then how much you'd be withdrawing each year. You could see it's going up and that's because of that inflation rate. So, in thirty-five years, seventy five thousand dollars should be two hundred and eleven dollars.

This should equal seventy five dollars in today's dollars because of that three percent annual inflation rate and this is so we could go all the way through our money until we're left with zero dollars and hopefully we die that day don't need to be morbid there. But these are things you need to consider. So, now we know the number that's great if this is me, if i have thirty five years to retirement, expect to live thirty years after i retire and i wanna have seventy five thousand dollars a year.

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For my living expenses and to enjoy myself. And i think i'm gonna get eight percent a year on average. I need almost three point five million dollars to retire. So, now the next question you might be asking yourself is am i on track. Well, that's what we're going to jump over to the next calculator, which i think is very cool and you can see in a second. So this is where you could plug everything in. So initial investment.

How much money do you currently have saved for investment?

Let's say a hundred thousand dollars. Okay, so we got a hundred thousand monthly contribution. Let's say fifteen hundred dollars a month length of time in years. So, we already have it here. We're gonna say thirty five years. So, we'll plug in three five estimated rate of return. We have that eight percent and then this is really cool your variance range. So we're gonna say, oh, very between two percent. So, if we're hoping to get eight percent, we made the market may do really well over the next thirty five years and will get ten percent or maybe it won't do so well and only get six percent and compound frequency will do annually. We're gonna hit calculate and then here we go.

So, in this scenario, this hypothetical person would be on track in thirty five years. They'll have four point five million, but they only need three point four million and then you could see on the low end. It might be a little lower two point seven or on the high end could be all the way up to seven point six. Now i was already playing a conservative with an estimate of eight percent. We could easily get ten percent and it could easily be higher than ten percent. Which you see we're going all the way up to thirteen million if the market does twelve percent a year or the low end, then would be that eight, which is four point five. So, it's cool messing around with these numbers.

Again, i like to be conservative and maybe i want to see this bottom number above that three point four as well. So, then i need to go back to the drawing boards if my initial investment is it is what it is. You can't change that unless you have a bunch of money that you can inject into the market right now, but maybe i need to bump my monthly contributions up what would one thousand seven hundred and fifty dollars do for me will recalculate and then we could see then on the lower end we're getting closer. We're getting to three point one million dollars. And on the higher end is more than enough, but these are the two calculators that could really help you set your goals so you could figure out exactly how much you should be investing each month and how much you're going to need by the time you retire.

You could figure that out with what's your expenses, you got rent, you got a car, maybe you're not gonna rent when you're older because you're going to own a house, but then you. Play money, you wanna go on vacations, you want to see the world. So you got to figure out what that annual income is going to be each year. And then once you plug that all in and you have your goal number set. Then you know right here, okay, how long am i gonna have to work for. Maybe i need to work a little bit longer. Maybe i need to contribute a little bit more each month or maybe i'm in a sweet spot where i don't have to worry and i'm definitely going to meet my retirement goals, but those are the two calculators. I think they're very cool.

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