Retirement Calculator Evaluation - Vanguard

Overall, I thought the Vanguard Retirement Calculator was a reasonably accurate estimator for how much is needed. It takes salary growth (due to inflation), social security payments, and life expectancy during retirement into account.

However, if one is more than 10 years from retirement, you may need to make an adjustment to one’s estimated salary. The calculator does not account for the possibility that your salary may grow faster than inflation during your early working years – e.g. due to promotions or job changes. For those that are 10 or more years from retirement, it may be necessary to project what your! future salary may be and put the present value in the salary column. (For specifics on this economic-speak, see example #2 below.)

This calculator asks for the following information:

1. Household Income
2. Percentage of Income Needed after Retirement
3. Social Security Benefts
4. Annual Pension Benefits
5. Current Savings
6. Annual Retirement Savings Contribution
7. Annual Investment Returns
8. Years Until Retirement
9. Years in Retirement

After filling out the information, the calculator lets one know whether you have sufficient savings or the amount that one needs to save before retirement.


Example 1 – Will B. Retired is a 64 year old that will retire next year. Here is his information.

1. $50,000 total income
2. 100% income needed in retirement
3. $25,560 Social Security (used 55 year old numbers)
4. $20,000 annual pension
5. $1! 0,000 savings
6. $5,000 savings per year
7. 8% savin! gs retur n in retirement
8. 1 year until retirement
9. Life expectancy – 95, i.e. 30 years in retirement


Income needed for retirement. $52,000 in year 1. The calculator shows that Will’s retirement income will be $48,786. Most of it is covered by Social Security and his pension. This situation is acceptable since Will is so close to retirement. However, the calculator recommends Will needs to save about $185,000 more to account for the possibility of higher inflation. Thus, Will savings is currently short and should work longer before retiring.

Example 2 – Em. S. Grad is 35 years old and plans to retire at 65. Em’s information is different that Wills in #3 (social security payments), #4 (assume there are no longer pensions), and #8 (30 instead of 1 year to retirement). In addition, Em expects to retire as a Division Manager, which has a current salary of $150,000.

1. $50,000 total income
2.! 100% income needed in retirement
3. $28,638 Social Security
4. $0 annual pension
5. $10,000 savings
6. $5,000 savings per year
7. 8% savings return in retirement
8. 30 year until retirement
9. Life expectancy – 95, i.e. 30 years in retirement

Amount needed for retirement: $1,266,596 to enable $162,000 per year of retirement income. And the calculator judges that Em is on track to provide $152,036 per year, assuming Social Security payments increase at the rate of inflation. Thus, Em will need to save about $1250 more per year to reach his goal.

However, the calculator doesn’t account for non-inflation related salary increase. Thus, $1,266,596 should be Em’s minimum retirement savings target.

To account for a higher salary due to promotion or job change, I recommend that Em should use the present salary of the position he expects have in the future. For example, if Em expe! cts to be a division manager when he retires, he should input ! the $150 ,000 salary of a division manager today. (For reference, I also changed the Social Security payment to the maximum of $36,864.) With this adjustment, here is what Em would need for a retirement nest egg: $6,708,059. This would represent the high side retirement savings target. For reference, this number is close to the T.Rowe Price calculator estimate of $7,427,816, which did not include Social Security payments.

Disclaimer: Examples are illustrative purposes only. Your results will vary with different inputs and assumptions. As with all retirement calculators, please consult with your financial advisor before taking any actions.

Photo Credit: morgueFile.com, Emily Roesly

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