Replacement ratio

The Formula

What Each Symbol Means

See It Worked With Real Numbers

A formula on its own does not tell you which number goes where. The how to calculate pension page applies this equation to a concrete case, shows every intermediate step, and names the mistakes that produce a wrong answer even when the algebra is right.

Where This Formula Appears

This equation is the working core of How To Calculate Pension, filed under Finance. Every number the guide produces comes from substituting into this one line.

Related Formulas

• Employer match from a match rate

  M = C x matchRate

• Financial independence target

  FIRE Number = Annual Spending / Safe Withdrawal Rate

• Future value of a 401(k) with match

  FV = B(1+r)^t + (C + M) x [((1+r)^t - 1) / r]

• Future value of an ordinary annuity

  FV = PMT x ((1 + i)^n - 1) / i

• Future value of contributions

  FV = balance x (1+r)^t + contribution x ((1+r)^t - 1) / r

• Interest earned

  Interest = Maturity - C x n

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