Retirement Shortfall Calculator

Retirement shortfall calculator for target income planning

This retirement shortfall calculator estimates whether your current savings and contributions are likely to cover the retirement income you want. It works by comparing two numbers: the amount you may have by retirement, and the amount you may need at retirement to fund your target income for the years you expect to be retired.

The key idea is simple: retirement is a long expense. If you want a monthly income for decades, you need a pool of savings big enough to provide that income. This tool turns your target monthly income into a required retirement savings amount, then projects your savings growth from today to retirement using your expected return and contributions.

To keep the calculator practical for normal users, the income target and any other retirement income are entered in today's money. The calculator then adjusts for inflation using a real return approach. You also get a view of the same figures in nominal money at retirement, which is often the number people expect to see on statements. If you only know rough estimates, that is fine. The purpose is to size the problem and identify whether you have a gap that needs action.

Assumptions and how to use this calculator

• Returns and inflation are assumed to be constant averages over time. Real outcomes vary year to year.
• Target retirement income is treated as inflation-adjusted spending, entered in today's money for easier planning.
• Other retirement income is optional and also entered in today's money. If you are unsure, leave it blank.
• Contributions are assumed to be made monthly and remain constant until retirement. If you expect increases, rerun with a higher contribution.
• Taxes, fees, and product rules are not modeled. Your real shortfall may be larger if fees and taxes are high.

Common questions

What does “shortfall” mean here?

A shortfall is the estimated gap between the retirement savings you may need at the start of retirement and the retirement savings you may have. If the gap is positive, you are projected to fall short. If it is negative, the calculator shows a surplus, meaning your projection is above the required amount under the assumptions.

Why does the calculator ask for both return and inflation?

Because the same currency amount has different buying power over time. The calculator converts your return and inflation into a real return. Real return is the growth rate after inflation, which is the relevant rate when your income target is entered in today's money.

What if my expected return is close to inflation?

If your expected return is close to inflation, your real return is low and the required savings amount increases. In that case, small changes in assumptions can move the result a lot. Use conservative assumptions and consider rerunning with a slightly lower return or higher inflation to stress-test your plan.

Should I include my pension or annuity in “other income”?

Yes, if it is a reliable income stream you expect during retirement. Enter an estimate of the monthly amount in today's money. If the amount will not keep up with inflation, enter a lower number to be conservative, or leave it blank and treat it as upside.

How can I improve accuracy without making this complicated?

Use realistic ages, include any dependable other income, and pick assumptions you can defend. A common error is using optimistic returns and low inflation. If you are unsure, run two scenarios: one realistic and one conservative. The difference between them shows how sensitive the outcome is to your inputs.