How Long Will My Retirement Savings Last?

Retirement Savings Calculator

Retirement Savings Calculator
Amount Saved $
Annual Interest Rate   %
Monthy Income $
Monthly Expenses $

If you have a retirement nest egg saved up, you can calculate how long the savings will last when your income decreases. The number of years your savings will last depends on the amount you have saved by the time you stop working, the annual interest rate, your monthly expenses, and your monthly income (such as a pension, social security, etc.) You can use the convenient Retirement Savings Calculator or apply the formula explained below.

To calculate how long your savings will last during retirement, you need to find the value of four variables. Call your nest egg (amount saved) P, your monthly expenses E, your monthly income I, and the annual interest rate R. For the formula below, express R as a decimal, for example, 5% = 0.05.

Now, use this formula to calculate N, the number of months that your retirement savings will be able to support you:

         Log(12E - 12I) - Log(12E - 12I - PR)
N = ------------------------------------------------
                          Log(1 + R/12)

You can use either the "Log" or "Ln" button on your calculator, just make sure to use the same button for each of the three terms. (Log is logarithm in base 10; Ln is logarithm in base e = 2.71828.). If your monthly income exceeds your expenses, your retirement will last indefinitely and there is no need to use the formula to determine when the savings will run out.

If the interest rate is 0, use this formula:

N = P/(E-I)

Example Computation

Suppose you have $50,000 saved for retirement and the annual interest rate on your savings is 4.5%. If your monthly expenses are $2,000 and your monthly income is $1,500 then P = 50000, R = 0.045, E = 2000, and I = 1500. To calculate how long the saving will last, we compute

         Log(24000 - 18000) - Log(24000 - 18000 - 2250)
N = ----------------------------------------------------------------
                               Log(1 + 0.00375)

= 0.47/0.003743
= 125.57 months, or 10 years and 5 months.

With these numbers, the savings will run out in less than 11 years after you stop working. To increase the length of time, you should decrease your monthly expenses, or save more before you stop working.

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