About the Pension Calculator

What it does

Projects your retirement fund and the income it can safely provide. It models contributions, investment growth, inflation, and optional annuity or drawdown rules.

Pension types

• Defined Contribution (DC): You and employer contribute to an investment account. Retirement income depends on the account value and drawdown rate.
• Defined Benefit (DB): Income is a formula (e.g., service × final salary × accrual rate). This calculator focuses on DC; DB can be added as a fixed monthly benefit input.

Fields in this calculator

• Current age and Retirement age: Years until retirement define the saving horizon.
• Current pension balance: Lump sum already saved.
• Monthly contribution: Your deposit each month.
• Employer match (optional): % match or fixed amount added monthly.
• Annual return before retirement (%): Expected average investment growth.
• Annual return during retirement (%): Post-retirement investment return for drawdown phase.
• Inflation (%) (optional): Used to show results in today’s money.
• Withdrawal method: Safe withdrawal rate (e.g., 3.5–4%), fixed annuity, or fixed real income.
• Planned retirement years or Life expectancy: Length of income needed.

Core formulas

Let:
  P0  = current balance
  C   = monthly contribution (incl. employer)
  r_a = annual pre-ret return (decimal), r = r_a/12
  n   = months to retirement

Future value at retirement:
  FV = P0·(1+r)^n + C·[((1+r)^n − 1)/r]

If modeling inflation j_a (decimal):
  real growth per month ≈ ((1+r_a)/(1+j_a))^(1/12) − 1
  use this in place of r to get real FV.

Drawdown options:
  • Safe Withdrawal Rate (SWR):
      Income_year1 = FV × swr
  • Fixed real income I for T years at real rate g:
      PV_needed = I × (1 − (1+g)^(−T)) / g
      Check FV ≥ PV_needed
  • Annuity factor (nominal rate i, T years):
      Payment = FV × [i / (1 − (1+i)^(−T))]
      

Outputs

• Projected fund at retirement (nominal and real).
• Estimated monthly retirement income under the chosen method.
• Total contributions vs. total growth.
• Replacement ratio: Estimated retirement income ÷ current gross income.

How to improve outcomes

• Increase contributions and capture full employer match.
• Extend saving horizon or delay retirement.
• Lower fees; small fee cuts compound over decades.
• Review asset mix; match risk to horizon.

Limitations

• Assumes constant average returns; markets are volatile.
• Tax, caps, and local pension rules are not modeled unless fields are provided.
• Longevity risk: living longer than planned reduces safe income.

Educational projection. Not financial advice. Verify assumptions, fees, and local pension rules before decisions.