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Step 6: Determine How Much You Still Need to Save

This step brings all the calculations together. Begin with the total investment needed (see Step 3). Subtract the future value of your current investments (see Step 4) from the total investment needed. Then subtract the amount your home will contribute to your retirement plan (see Step 5). This will give you the final amount (in future dollars) that you must invest, or the total investment shortfall.

Since you have already accounted for the impact of inflation, both before retirement and during retirement, you can use a financial calculator to find out how much you will need to save each month. Set the future value equal to the total investment shortfall; set N equal to the number of years until you retire; and set the interest rate equal to the amount of your expected portfolio return before you retire. Then solve for the payment (PMT). This calculation will give you the amount of money you must save every month or year in order to achieve your retirement goals.

 



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