The formula to calculate the yearly savings needed is:
\[ \text{Save}_{\text{year}} = \frac{\text{Amt}_{\text{req}} \times (\text{r} - \text{g})}{(1 + \text{r})^{\text{n}} - (1 + \text{g})^{\text{n}}} \]
where:
This calculator helps you determine how much you need to save per year to reach your FIRE (Financial Independence, Retire Early) number. It considers your desired retirement savings amount, expected rate of return on savings, salary growth rate (or inflation), and the number of years you plan to save.
Let's take an example:
Step 1: Plug the values into the formula:
\[ \text{Save}_{\text{year}} = \frac{1,000,000 \times (0.05 - 0.025)}{(1 + 0.05)^{30} - (1 + 0.025)^{30}} \]
Step 2: Calculate the numerator and denominator:
Numerator: \(1,000,000 \times 0.025 = 25,000\)
Denominator: \((1.05)^{30} - (1.025)^{30} = 4.321942 - 2.096053 = 2.225889\)
Step 3: Divide the numerator by the denominator:
\[ \text{Save}_{\text{year}} = \frac{25,000}{2.225889} = 11,239.11 \]
Thus, you need to save $11,239.11 per year to reach your FIRE number of $1,000,000 in 30 years.
