Nestegg Cycle © WHAT to ENTER:
For enough background, please be sure you have read "What this is NOT", and "CONCEPTS & EXAMPLES".
There are a series of data items to be entered.
All come with defaults, which you are free to re-enter with values that make more sense for you.
The entry item, Goal Salary Replacement%, is handled separately on another page.
Savings (as Multiple of Salary):
You will notice that there is NO place for entering your salary.
A salary number is irrelevant for this calculation!
For most people starting out, there is no retirement savings yet, so the default value is 0.
If you do have retirement savings, whether because you have been working for some years or decades,
or have received a windfall, you simply do a side calculation to figure out what to enter here:
(Dollar amount of your retirement savings) divided by (dollar amount of your current salary)
EX.1: you have 25K saved and you earn 50K per year. 25000 / 50000 = 0.5 ... you enter 0.5 in this box.
EX.2: you have 100K saved and you earn 50K per year. 100000 / 50000 = 2.0 ... you enter 2.0 in this box.
The effect of a larger salary multiple here, is to reduce the contributions you still need to make.
At a large enough multiple, you could "coast" to retirement on investment growth alone,
and would not need to make additional contributions.
Remember that to be effective, your existing savings would need to be re-invested to match or exceed
the yield that pairs with the contribution rate you select, if earning less now.
Starting Age, Saving for Retirement:
This is probably the age you are now, as you run the calculation, but feel free to try other what-if ages.
An important theme of this site is that earlier is better: More years to contribute and to compound.
The effort to reach a specific salary replacement goal,
gets more and more difficult the later you start. The default goal of 75% is quite MODEST if addressed properly
at age 25 ... is still possible with increased difficulty if begun at age 40 ...
but almost impossible if you reach age 55 before beginning to save for retirement. You'd probably need to settle
for a smaller goal salary replacement and/or a delayed retirement age. This calculator will help you quantify it.
Retirement Age (Stop saving, Start collecting):
Set to age 67 as the default. This is the current full retirement age for Social Security.
Based on experiments I've run with the software, a determined 25-year-old with sufficient dedication, understanding,
and these calculations, could reasonably fund a retirement that begins at age 42.
Effective with the version of early March 2022, two new input elements appear on the screen,
to the right of Retirement Age, to specify an optional POST-retirement Yield:
1. The POST-retirement Yield desired (default value of 4.5% is provided).
2. A Checkbox, to turn this new feature ON or OFF (default value is OFF: NOT checked).
End Age (Money needs to last until):
Set to age 105 by default: an age very rarely achieved at this writing in the year 2021.
Improvements in medicine during the past 100 years have increased expected lifespans,
so a person in their twenties now, might want to set this age even higher (say, 110 instead of 105).
The calculation is designed to exhaust your nestegg at the End_Age specified.
You want this to be old enough that you are unlikely to survive it.
If you have reason to believe your lifespan is limited, choose a lower age for a larger annual payout,
but BE VERY CLEAR that your retirement account will be EMPTY if you reach the age you specify.
An alternative chosen by some, is to purchase longevity insurance. Your decision.
Annual Salary RAISE% (best guess):
Set to 3% by default. If you are a rising star, be aware that higher annual raises will require extra
contributions to fund a given retirement goal, and you'll want to get a realistic calculation.
This is because each prior year's contribution becomes less significant as your raises increase.
Annual INFLATION% (best guess):
Set to 2.5% by default. This could be a wildcard.
Inflation had been quite tame for a long time, but has bumped up as this is written in August 2021.
Inflation averaged 8% per year during most of the 1970's.
Stress-test your calculation by cranking up this number in a what-if exercise, if interested.
Contribution Range:
Newly added in August 2021. The Custom option was added in September 2021.
This is a dropdown list, just to the left of the CALCULATE button.
The choices are:
Broad - This is the default. Contributions of: 2.5%, 5.0%, 10.0%, 20.0%, 40.0% and 80.0%
Low - Contributions of: 0.5%, 1.0% ... up to 7.0%, in steps of 0.5%
Medium - Contributions of: 7.5%, 10.0% ... up to 27.5%, in steps of 2.5%
High - Contributions of: 30%, 35% ... up to 85%, in steps of 5%
Custom - Lets you get as specific, as focused, as you want: opens two new data entry elements:
First is any "central" contribution% of interest,
Second is any desired "step" (to be applied 5 times each, above and below the central value)
So you'll see yields for 11 contributions reported: your "central" value, 5 steps above, and 5 steps below.
Extend the Plotted Tradeoffs:
Newly added in December 2021. This is a dropdown list, to left of the "Contribution Range". The choices are:
NO-Extend-Plot - The default. Usually this is fine.
Low-C-Extend - IF you are looking for yields that work with very LOW contributions, and some are reported as "from MIN",
this will perform extra work to extend the search to lower-contribution solutions.
High-C-Extend - IF you are looking for yields that work with very HIGH contributions, and some are reported as "from MAX",
this will perform extra work to extend the search to higher-contribution solutions.
Sometimes the extended results can be unexpected. This is a complex topic.
You are encouraged to view your PLOTTED TRADEOFF CURVE, as the shape of the curve, and grouping of plot-points along it,
can give you more insights into your situation.