Income needed for retirement is a calculation to help predict what an individual will need during retirement years based on their current income. It takes into account two major variables, retirement factor and inflation. For the explanation below we will use the following example:

John, age 30, currently earning $3,000 a month, 80% retirement factor, retiring at age 65, 4% inflation

This number is calculated by the following equation:

current monthly income x retirement factor = adjusted monthly income

$3,000 x .80 = $2,400

Adjusted monthly income now must be calculated against inflation for 35 years.

adjusted monthly income x inflation rate = One year of inflation

$2,400 x 1.04 = $2,496

So if inflation averages 4% for the 35 years till John retires that same calculation must be continued until age 65.

1 | $2,496.00 | |

2 | $2,595.84 | |

3 | $2,699.67 | |

4 | $2,807.66 | |

5 | $2,919.97 | |

6 | $3,036.77 | |

7 | $3,158.24 | |

8 | $3,284.57 | |

9 | $3,415.95 | |

10 | $3,552.59 | |

11 | $3,694.69 | |

12 | $3,842.48 | |

13 | $3,996.18 | |

14 | $4,156.02 | |

15 | $4,322.26 | |

16 | $4,495.15 | |

17 | $4,674.96 | |

18 | $4,861.96 | |

19 | $5,056.44 | |

20 | $5,258.70 | |

21 | $5,469.04 | |

22 | $5,687.81 | |

23 | $5,915.32 | |

24 | $6,151.93 | |

25 | $6,398.01 | |

26 | $6,653.93 | |

27 | $6,920.08 | |

28 | $7,196.89 | |

29 | $7,484.76 | |

30 | $7,784.15 | |

31 | $8,095.52 | |

32 | $8,419.34 | |

33 | $8,756.11 | |

34 | $9,106.36 | |

35 | $9,470.61 |

So, John’s current income of $3,000 will be equal to $9,471 at age 65.