How would I calculate my Retirement?

I'm 35 and plan to begin my retirement. I want to set aside equal amounts at the end of each of the next 25 years so I can retire at 60. I say my life expectancy is 80 and I would like to withdraw $25,000 per year on my 61st through 80th birthdays. The account is expected to earn 10% per annum for the entire period of time. How much annual deposits must I make?|||Using the formulas at





http://www.tvmcalcs.com/tvm/formulas/reg鈥?/a>





first we calculate the amount you would need to make the payments after you retire





The formula is





25000(1-(1/(1.1^20))/0.1)





The calculations:





1.1^20=6.7275





1/6.7275=0.14864





1-0.14854=0.85146





25000(0.85146)/0.1=212865





So you will have to have $212,865.





Now we need to calculate how much you need to put aside each year for 25 years to get that amount.





The formula is





212865/(((1.1^25)-1)/0.1)





The calculations:





1,1^25=10.8437





10.8437-1=9.8437





9.8437/0.1=98.437





212865/98.437=2162.45





So you would have to save 2,162.45 per year.





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There are a couple of points that you likely have already thought about, but I want to make sure in case you have not.





(1) Remember that inflation will significantly reduce the buying power of $25,000 in 25 years when you want to retire, and 20 years after that when you are 80 it will have reduced it even further, so it will probably buy much less than half as much as it would buy today.





(2) If you are working in the United States you will start collecting Social Security sometime in your 60's, but certainly not before you are 62. Consequently you may need to draw more cash for the first few years if you actually retire at 60. [I know there are some people who say Social Security will not last until you retire, but I think they are wrong. The amount you get from it may be reduced, and you might have to wait another year or two before you start collecting it, but I do not believe any reduction would be very big.]





(3) Your life expectancy may be 80 right now, but with medical advances it is entirely possible you will live longer than that. You need to consider what you will do if you live to be 90 or 100.|||Fidelity and T Rowe Price have good retirement calculators.





There are also very good calculators at the www.bankrate.com website.