A Retirement Planning Calculator

By Stock Research Pro • July 13th, 2009

Before you can develop a successful plan to build your retirement savings, you need to reasonably estimate how much money you will need to enjoy the kind of retirement you’re hoping for. Effective retirement planning takes into consideration the threat of inflation, which can erode your savings and jeopardize the lifestyle choices you will be able to make once retired. Retirement planning involves three basic phases- accumulation, preservation, and distribution- inflation should be factored into all three phases as you determine how much you will need to retire comfortably.

The Phases of Retirement Planning

Accumulation: During the accumulation phase, the investor is building up savings with the intention of having an adequate amount of money for retirement. In deferring spending in favor of investing, individuals are growing their savings over time. In general, the longer the accumulation phase, the better their chances of meeting financial goals for retirement.

Preservation: As the individual approaches retirement age, there is a shift in importance from continued accumulation of savings to the preservation of those accumulated savings. Preventing the erosion of principal and making plans for distribution become the priority.

Distribution: In the distribution phase, the structure of invested assets is modified to provide income in post-retirement. The distribution phase begins at retirement and lasts through the rest of the individual’s life.

Using the Calculator

• The average inflation rate over the past 10 years or so has been between 2%-4%.

• While the percentage of income needed in retirement depends on the individual, many financial experts recommend planning for a minimum need of about 70%.

The Threat of Inflation in Retirement Planning

Inflation is the persistent increase in consumer price levels that leads to a corresponding decline in consumer purchasing power. For working individuals, inflation is typically factored into ongoing pay structures and wage increases. For retirees and others living on fixed-incomes, inflation simply erodes purchasing power.

Accounting for the impact that rising prices will have over the course of many years is a significant part of retirement planning, one that many individuals do not consider.


The above information is educational and should not be interpreted as financial advice. For advice that is specific to your circumstances, you should consult a financial or tax advisor.

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