Retirement Calculator

How to use the retirement calculator

Enter your age, when you want to retire and the age to plan until — a common choice is your life expectancy plus a few years, because running out at 88 is a bigger problem than dying with money left. Add what you have saved for retirement, what you save each month (including any employer match) and how much you expect to raise that amount each year. Then set the expected annual returns before and during retirement, inflation, the yearly income you want in retirement in today’s dollars, and your Social Security estimate.

The result shows your projected nest egg in future and today’s dollars, whether it lasts, the size of any shortfall and the extra monthly saving that would close it. The chart, the working and the year-by-year table update as you type, and your inputs are kept in the page address so you can bookmark or share a scenario.

How the calculation works

While you save, contributions go in at the end of each month and the balance compounds monthly at the rate equivalent to your annual return. In retirement, the part of your income that Social Security doesn’t cover is withdrawn at the start of each year and rises with inflation, while the rest of the balance keeps earning the retirement return. The nest egg you need is the present value of those N withdrawals: if you have at least that much on your retirement date, the money lasts to your planning age. Social Security is treated as rising with inflation, as its yearly cost-of-living adjustments are designed to do.

Worked example

The calculator opens with a 35-year-old who has $50,000 saved, adds $500 a month (raised 2% a year) and plans to retire at 67, with money lasting to 90. Returns are 7% while saving and 5% in retirement, and inflation is 3%.

• After 32 years of saving, the projected nest egg is $1,281,428.24 — worth $497,626.04 in today’s dollars ($1,281,428.24 ÷ 1.03^32).
• The income goal is $60,000 a year in today’s dollars and Social Security pays $2,000 a month, so savings must supply $60,000 − $24,000 = $36,000 a year.
• In 32 years, with 3% inflation, that first withdrawal is $36,000 × 1.03^32 = $92,702.98, rising 3% a year for 23 years.
• Funding those withdrawals at a 5% return takes $1,739,709.09 at 67 ($675,593 in today’s dollars).
• The plan is short by $458,280.86, and at this income the money runs out at age 82. Saving about $271 more a month (also rising 2% a year) — or investing $52,584 more today — closes the gap.

Notice the first-year withdrawal of $92,703 is 7.2% of the projected nest egg, well above the 4% that Bengen found lasted at least 33 years in every historical period he tested.

The 4% rule: where it comes from and its limits

In October 1994, financial planner William P. Bengen published “Determining Withdrawal Rates Using Historical Data” in the Journal of Financial Planning. Instead of assuming average returns, he replayed actual U.S. market history from 1926 for retirees starting in each year, withdrawing a fixed percentage in year one and then raising the dollar amount with inflation. With half stocks and half intermediate-term Treasuries, a 4% first-year withdrawal never ran out in less than 33 years; 4.25% could fail in 28. He recommended holding 50–75% in stocks. Later research, most famously the 1998 “Trinity study”, reached similar conclusions, and the idea became known as the 4% rule.

It is a useful benchmark, but be honest about what it is:

• It is one country’s history. The 20th-century U.S. market was among the world’s best; the future could be worse.
• It targets about 30 years. Retiring at 50 or planning to 100 needs a lower starting rate.
• It ignores fees and taxes. Bengen assumed tax-deferred accounts and market returns; fund and advisory fees come straight out of what you can spend.
• Spending is rigid. Real retirees cut back after bad years, which helps; the rule assumes they never do.
• Sequence risk. In Bengen’s data the most damaging event was the 1973–74 bear market combined with high inflation, which hurt people who had retired as much as 20 years earlier. Bad years early in retirement do far more harm than the same years later — something an average return, like the fixed rates in this calculator, cannot show.

This calculator uses steady returns, so treat its answer as a central estimate and test lower returns and higher inflation too. The “4% rule income” figure shows what 4% of your projected nest egg would pay, in today’s dollars, as a cross-check.

Tips and common mistakes

• Mixing nominal and real numbers. Returns and the nest egg here are in future dollars; the income goal and Social Security are in today’s dollars. The “today’s dollars” column shows what the balance would buy now.
• Forgetting taxes. Withdrawals from traditional 401(k)s and IRAs are taxable income, so set your income goal before tax. Roth withdrawals that meet the rules are tax-free.
• Leaving out health care. Medicare starts at 65; retiring earlier means budgeting for insurance until then.
• Assuming today’s balance is spendable. Early withdrawals from retirement accounts can carry taxes and penalties.

To see what inflation has done to prices in the past, try the inflation calculator; to model a single account with regular deposits, use the compound interest calculator. These are projections from the assumptions you enter, not financial advice — markets don’t deliver steady returns, and a fee-only financial planner can help with a full plan.