You might say, “wait, I’m too young for retirement planning.” Think again! When you are young is the best time to start because with the power of compound interest the earlier you start the less effort you have to put in to build that nest egg.
I have a basic spreadsheet that you can fill in to calculate how much you need to set aside for your monthly retirement fund (I recommend investing in a mutual fund under your Roth IRA because it grows tax free).
The purpose of this sheet is to aid planning for retirement. Rather than aiming in the dark for this you can systematically plan on a monthly basis for your retirement using the scale featured below.
Determine how much per month you should be saving at 12% interest in order to retire at 65 years old with what you need.
If we are saving at 12% and inflation is at 4% then we are moving ahead of inflation at a net of 8% per year. If you invest your nest egg at retirement at 12% and want to break even with 4% inflation you will be living on 8% income.
Annual Income (today) you wish to retire on $
Divide by .08
(nest egg needed) equals $
Step Two:
To achieve that nest egg you will save at 12% netting 8% after inflation so we will target that nest egg using 8%.
X =
Nest Egg Needed x Factor (see chart below) = Monthly Savings Needed
8% Factors (select the one that matches your age)
| AGE | YEARS TO SAVE | FACTOR |
| 20 | 45 | .000190 |
| 25 | 40 | .000286 |
| 30 | 35 | .000436 |
| 35 | 30 | .000671 |
| 40 | 25 | .001051 |
| 50 | 15 | .002890 |
| 55 | 10 | .005466 |
