Retirement Savings Formula Explained, With Examples
Every retirement savings result comes from one formula. Once you understand what goes into it, you can sanity-check any figure you are given, whether by an employer, a bank, a teacher or another website.
The formula
FV with monthly contributions; draw = 4% of the pot ÷ 12.
What each input means
- Current savings (S$): the value you enter in the calculator.
- Monthly saving (S$): the value you enter in the calculator.
- Expected return (%): the value you enter in the calculator.
- Years to retirement: the value you enter in the calculator.
Example
For example, with these inputs:
- Current savings (S$): 80,000
- Monthly saving (S$): 1,000
- Expected return (%): 5
- Years to retirement: 25
the calculator returns:
- Projected nest egg: S$874,012.94
- Safe monthly draw at 4% a year: S$2,913.38
How the result changes
The table keeps the other inputs at their example values and changes current savings (s$).
| Current savings (S$) | Projected nest egg | Safe monthly draw at 4% a year |
|---|---|---|
| 80,000 | S$874,012.94 | S$2,913.38 |
| 40,000 | S$734,761.33 | S$2,449.20 |
| 60,000 | S$804,387.14 | S$2,681.29 |
| 100,000 | S$943,638.75 | S$3,145.46 |
| 120,000 | S$1,013,264.56 | S$3,377.55 |
Why it matters
Interest rates, instalments and returns compound over years, so a small difference in rate or tenure turns into thousands of dollars. Working the numbers out yourself makes it easier to compare bank offers, avoid expensive debt and plan savings goals.
Cars in Singapore carry costs found almost nowhere else, including the Certificate of Entitlement and the Additional Registration Fee. Loans are capped at 60% or 70% of the price depending on the car's Open Market Value, and the maximum tenure is seven years.
Interest in Singapore is quoted in several ways. Mortgages and savings accounts use effective annual rates, while car loans and many personal loans are advertised at flat rates that look much lower than their true cost. Banks must disclose the effective interest rate, and comparing on that basis gives a fair picture.
Compounding is the reason long-term saving works: returns earn further returns, so the growth curve steepens over time. The same maths works against you with debt, which is why credit card balances at around 27% a year grow quickly if only minimum payments are made.
Related calculations
- Electricity Bill Calculator: Estimates your electricity bill.
- Air-Con Running Cost Calculator: Estimates what running the air-con costs each month.
- Car Loan Calculator: Car loans in Singapore are quoted at a flat rate.
- Maximum Car Loan Calculator: MAS rules cap car loans at 70% of the price if OMV is S$20,000 or less, and 60% if OMV is higher, with a maximum tenure of 7 years.
Use the Retirement Savings Calculator to plug in your own numbers.
Run your own numbers: Retirement Savings Calculator