Retirement planner

Because the money keeps earning a return and the withdrawals grow with inflation. The tool discounts each year’s net withdrawal (spending minus pension) back to the retirement date at the post-retirement return, then adds them up, which lands below a naive multiplication. A higher post-retirement return discounts harder and lowers the required capital.

Using the standard example for the Chinese urban employee basic pension: basic pension = (local average wage of the previous year + your indexed average contribution wage) / 2 × contribution years × 1%, and personal account pension = account balance / payout months. Payout months come from the table attached to Guofa [2005] No. 38, where age 60 maps to 139. This is a simplification: transitional pensions, deemed contribution years and local adjustments are excluded, and the final figure is set by your local social-insurance office.

Yes — both are assumed to be indexed to inflation, so the inflation cancels out in the net shortfall and only the real gap remains. If local pension adjustments lag inflation, the real gap will be larger than shown; lowering the average wage or the contribution index is a quick way to approximate that.

It means the balance at retirement is zero, or below the first year’s net withdrawal, so the plan fails in year one. Raise the monthly contribution, retire later or trim retirement spending — the tool also reports the monthly contribution that would close the gap.

Use a long-run annual return before retirement (5%–7% for a balanced portfolio) and a lower one afterwards (3%–4%) because volatility should fall. For inflation, the average CPI of the past decade is a reasonable starting point. These assumptions dominate the result, so shift one by a percentage point and check whether the conclusion still holds.