New Pension Calculator Shows Monthly Deposits Needed to Reach Desired Retirement Income

A new pension calculator tool allows users to start with their desired monthly retirement income and work backward to determine the monthly deposit required to reach that goal. Unlike traditional calculators that begin with monthly deposits and estimate future pensions, this tool suits individuals who know the lifestyle they want in retirement and want to translate it into actionable savings today.

The calculator is particularly useful for young savers, self-employed individuals without employer contributions, and those who discover their current savings plan is insufficient. It first converts the target pension into a total retirement savings amount by multiplying the desired monthly pension by a conversion factor (currently averaging 200). For example, a monthly pension of 10,000 shekels requires a savings target of 2 million shekels. Then, it calculates the monthly deposit needed, factoring in expected investment returns over the years until retirement. Existing savings reduce the required monthly deposit accordingly.

Time is the most critical factor influencing the monthly deposit. For instance, a 35-year-old aiming for a 10,000 shekel monthly pension with no current savings would need to deposit about 2,570 shekels monthly until age 67, assuming a 4% annual return. However, if they already have 200,000 shekels saved, the required monthly deposit drops to approximately 1,650 shekels. Starting savings earlier significantly lowers the monthly amount needed, while delaying savings by a decade can double the required deposits.

The tool also translates the monthly deposit into a percentage of income, helping users understand if their current pension contributions are adequate or need to increase. For example, a 2,570 shekel deposit corresponds to about 17% of a 15,000 shekel salary, close to the standard employee pension contribution. Self-employed individuals may need to add voluntary contributions beyond the legal minimum.

Users can also evaluate the cost of increasing their retirement income goal. Raising the monthly pension target from 10,000 to 12,000 shekels increases the savings target from 2 million to 2.4 million shekels, requiring several hundred shekels more per month in deposits. This helps balance aspirations for a higher retirement lifestyle against current disposable income.

The article advises setting realistic pension goals, considering inflation and the purchasing power of money decades ahead. It also notes that state old-age pensions reduce the amount private savings need to cover. Since assumptions like conversion factors, returns, and retirement age affect required deposits, users should test different scenarios and review their pension reports annually to stay on track.