How much do I need to save to retire in 10 years?

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A while back I made a savings calculator to answer the simple question... what would it take to retire in (X) years? But if you're like me, online calculators are fun once. Spreadsheets are fun FOREVER! Here's how to make your own spreadsheet to tell you the answers. 

Both Excel and Google Sheets have a PMT function that calculates payments on a loan - or in your case, a fund that will set you up for a future of withdrawals without actually going down.

Full disclosure: talk to your own advisor. I have not retired, don't plan to retire in 10 years, I just like math. 



The payment (PMT) function needs to know...

1) Rate - what interest are you getting on your investments? I've read a whole range on what values you should use for this, from 4% to 10% or more. I used 5% in this example.

2) Number of payments - this is years x months since you're saving monthly. You can swap out every 12 for 26 if you get paid every other week and like to think of savings as per paycheck, just be sure to change it in your rate cell too.

3) Net worth today - anything you have that you'll be able to draw down on.

4) Annual expenses. If you only use a few sources to pay things (a credit card, a checking account) you can look at the output from those accounts to figure it up quickly. You can throw out expenses that you won't have in retirement, like a mortgage (if you're paying it off) or childcare (kids grow) but there may be unexpected expenses too like healthcare. 

Now you have a spreadsheet where you can play with the numbers. What if you lowered annual expenses? What if you waited to retire in a few years? 

In this example, the person is trying to save $2M (a LOT!) in only 10 years (a short time!) so they have to invest a boatload of cash every month. If the same person wants to retire in 20 years, their monthly savings drops down from $7500 to $1500... twice the years but 1/5 the money. That's a deal!

You may notice in this example that if you put in 30 years (360 months) the investment number is negative $281. That's because it assumes you start with a $500,000 net worth. If you want $2M and you invest $500,000 at 5% for 30 years, you don't have to contribute a darn thing to it ever again. It will be over $2M just getting the returns it gets. This is why we're all jealous of young people who have ANY savings started... having time ahead of you is worth millions. Literally!

Keep in mind this is pure math. It doesn't consider new expenses, social security, pensions, or any other unknowns, but it'll start to give you ideas.

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