**Retirement Formula**

March 17, 1975

Derived by Bill Larsen

©1975 Larsen

1 Determine the retirement needs per year in current dollars.

2 Determine the following variables:

2.1 Rate of return assets will earn **I** =
__________

2.2 Inflation rate **G** =
__________

2.3 Years till retirement ** N** =
__________

2.4 Number of years in retirement **X** =
__________

2.5 Present value of retirement assets **PV**=
__________

3 Calculate future value of retirement needs per year.

**FV _{needs}= (STEP 1) * (1+G**

**Future value of needs at retirement**

4 Calculate future value of assets required to sustain retirement needs in step 3.

**I _{e}**

**Effective Rate of Return**

**FV _{assets} =(STEP 3)*((1+I_{e}**

**Future value of assets needed**.

5 Calculate the amount to save each year to reach goal in step 4. Increase amount saved each year by inflation or own goal. NOTE: If other than inflation a new effective rate must be calculated for this step only.

**SAVE _{year}=((STEP 4)/(1+I**

IF YOU HAVE PRESENT ASSETS

**SAVE _{year}=((STEP 4)/(1+I**

6 Recalculate each year up till retirement to minimize any large fluctuations in rate of
return,
inflation, savings rate and retirement age.

7 During retirement recalculate yearly disbursements based on the previous years variables determined in step 2. Note: X will decrease each year you are retired.

**DISBURSEMENT= (ASSETS*(1+G****)*(1+I _{e})^{X } * I_{e})/((1+I_{e})^{X}-1)**

PICTORIAL CORRECT FORMULAS