Sanjib Saha
19 March 2023
Are you thinking of dialing down at work, but worried about not having enough in retirement if you stop saving? Depending on how much you’ve saved already and how long your investments can grow untapped, you might get there sooner than you think. Instead of guessing, why don’t you get a clearer picture by doing the math with our simple calculator?
Let’s say that you’ve saved some money for retirement and plan to add to it regularly in future years. Let’s also say that you don’t plan to retire before you’re 65 years old. “Retire at 65” means you’d start withdrawing from your retirement fund only when you reach that age, but it doesn’t mean that you need to keep saving until then. As such, you may not even need a whole lot more if you’ve already saved enough. To be clear, we aren’t talking about spending from your savings before your retirement age. We are talking about not having to add more to it.
You might ask, “What difference does it make if I’m unable to live off my savings until 65? For starter, not having to save anymore means that all you need from a job is to pay your ongoing bills and meet your non-retirement financial obligations, such as paying off mortgage or college expenses for kids. A reduced income need might give you the option to switch to a different work that pays less but offers better work-life harmony, or take a break, or work parttime and so on.
Compounding is a powerful tool when your investments have time to grow, and you have an asset allocation with a reasonable growth element that’s consistent with your financial goals and risk profile. If you leave your investments aside to grow untapped, the results will surprise you.
Note: The calculator is based on annual compound-interest formula, using a 4% annual inflation-adjusted investment return until age 65. It also uses the 4% rule for retirement withdrawals. Because these numbers are based on oversimplified assumptions that may not be relevant in real world scenarios, they should be used as illustration only.