How It Works

Understanding the Retirement Calculator

Overview

This retirement calculator helps you plan for retirement by using advanced mathematical solvers and Monte Carlo simulations. The calculator offers two main calculation modes:

Calculate Required Savings

Determines how much you need to save annually to retire at your target age

Calculate Retirement Age

Finds the earliest age you can retire based on your current savings rate

Both modes use Monte Carlo analysis to project your retirement readiness by running thousands of simulations with varying market conditions. Each simulation takes into account:

1Your current liquid net worth
2Annual savings during your working years
3Your current annual expenses (automatically adjusted for inflation)
4Expected post-retirement income (social security, pensions, etc.)
5Market returns and volatility
6Inflation rates and their variability

The Solver

The calculator uses a binary search algorithm to find optimal solutions:

For Required Savings

The solver finds the minimum annual contribution needed to achieve a successful retirement at your target age

For Retirement Age

The solver finds the earliest age at which you can retire with your current savings rate

1The solver evaluates each potential solution using Monte Carlo simulations to ensure reliability
2It uses the 10th percentile outcome (P10) as a conservative measure of success
3To provide a safety buffer, the solver ensures that even in a conservative (10th percentile) outcome, your portfolio meets a 'Minimum End Value' (default $100,000) by the maximum simulation age. You can adjust this target in Advanced Settings.
4The binary search approach efficiently narrows down the optimal solution

Monte Carlo Simulation

Monte Carlo simulation is a statistical method that runs thousands of possible scenarios to understand the range of potential outcomes. In our case:

1Each simulation represents one possible path your portfolio could take
2Market returns and inflation rates are randomly generated based on historical patterns
3We track your portfolio value year by year, accounting for contributions and withdrawals
4The results show the probability of different outcomes, helping you understand the range of possibilities
5The solver uses these simulations to evaluate potential solutions

Key Inputs

1Core Settings

1Current Age: Your starting point for the simulation
2Current Liquid Net Worth: Your existing savings and investments (excluding illiquid assets)
3Annual Savings: How much you plan to save each year until retirement (used as input for retirement age calculation)
4Current Annual Expenses: Your current yearly expenses (automatically adjusted for inflation)
5Retirement Age: When you plan to stop working and start withdrawing (used as input for savings calculation)
6Already Retired: Toggle if you're already retired and want to calculate based on your current situation

2Advanced Settings

1Post-Retirement Income: Expected income during retirement from sources like social security, pensions, and rental income
2Post-Retirement Tax Rate: Expected tax rate on your post-retirement income
3Expected Market Return: Average annual return on investments
4Market Volatility: How much returns might vary from year to year
5Expected Inflation Rate: Average annual increase in prices
6Inflation Volatility: How much inflation might vary
7Number of Simulations: How many scenarios to run
8Maximum Simulation Age: Age until which to run the simulation

Privacy & Security

Your privacy is our top priority. This retirement calculator:

1Runs entirely in your browser using Web Workers for calculations
2Never sends your financial data to any server
3Does not store any of your information
4Performs all calculations locally on your device