How this retirement calculator works
The calculator answers a simple question: will your savings support the income you want in retirement? It first projects your savings forward to your retirement age, growing your current balance and monthly contributions at your expected annual return, compounded monthly. It then estimates the nest egg you need by inflating your desired income into future dollars and dividing by a safe withdrawal rate. The difference between the two is your surplus or shortfall, and the calculator shows the extra monthly saving that would close any gap.
For example, a 35-year-old with $60,000 saved who contributes $750 a month at a 6% return will have roughly $1.1 million at 65. Wanting $60,000 a year in today’s money with 2.5% inflation means about $126,000 a year in 30 years, which at a 4% withdrawal rate requires a nest egg of around $3.1 million.
The 4% rule
The withdrawal rate comes from research by financial planner William Bengen and the later Trinity Study. They found that a retiree who withdrew 4% of their portfolio in the first year, then adjusted that amount for inflation each year, would historically have had money last at least 30 years in nearly all periods tested, using a mix of stocks and bonds. Dividing your income need by 0.04 is the same as multiplying it by 25. Some planners now suggest 3% to 3.5% for early retirees or long retirements, while others argue that flexible spending allows higher rates. You can change the rate to test different assumptions.
Do not forget other income
Your savings do not have to cover all of your spending. Social Security, a workplace pension, rental income or part-time work all reduce the amount your portfolio needs to provide. To account for them, enter only the income your savings must cover. If you expect $24,000 a year from Social Security and want $60,000 in total, enter $36,000. You can get a personalized Social Security estimate at ssa.gov. Healthcare is a major cost in retirement, especially before Medicare eligibility at 65, so build it into your income target.
Assumptions and limits
Returns are never smooth. A market crash just before or after you retire, known as sequence-of-returns risk, can have a big effect even if average returns look fine. Taxes are not modeled; withdrawals from traditional 401(k) and IRA accounts are taxed as income, while Roth withdrawals are generally tax free. Employer matches count as contributions, so include them in your monthly amount. Treat the result as a planning estimate, revisit it every year or two, and consider speaking with a fee-only financial planner before making major decisions.
Frequently asked questions
How much do I need to retire?
A common rule of thumb is 25 times the yearly income your savings must provide, based on the 4% rule. Other income such as Social Security reduces the amount needed.
What return should I assume?
Many planners use 5% to 7% for a diversified portfolio before retirement. Using a lower figure gives a more conservative plan.
Should I include my employer match?
Yes. Add your employer match to your monthly contribution because it grows along with your own money.
Why is the nest egg so large?
Because inflation raises the income you need in future dollars. The calculator also shows your projected income in today’s dollars for comparison.