Retirement Calculator

How Is Retirement Savings Growth Calculated?

Retirement projections combine two compound-growth calculations: the future value of your current savings, and the future value of a stream of equal monthly contributions (an "ordinary annuity"). Both grow at the same assumed rate of return, compounding monthly.

• FV — projected balance at retirement
• P — current savings
• C — monthly contribution
• r — monthly rate of return (annual rate ÷ 12)
• n — number of months until retirement

The withdrawal-phase estimate runs the same formula in reverse: given the balance at retirement, it solves for the fixed monthly payment that fully depletes the balance by your life expectancy, assuming the remaining balance keeps earning a (typically lower) return throughout retirement.

Why Starting Early Matters More Than the Amount

Because returns compound on top of previous returns, time in the market is the single biggest driver of a retirement balance — bigger than the contribution amount itself. Someone who saves $300/month starting at 25 will typically out-accumulate someone saving $500/month starting at 35, purely because the earlier saver's money has ten extra years to compound. A common guideline is to save 10% to 15% of pre-tax income per year throughout your working life; starting that habit at 25 can realistically build a seven-figure balance by traditional retirement age at a moderate return rate.

This is also why inflation quietly erodes retirement plans that look fine on paper. The average US inflation rate over the past 30 years has been around 2.6% per year — low enough to ignore day-to-day, but compounded over 30–40 working years it can cut the purchasing power of a nominal dollar amount roughly in half. That is why this calculator also shows your projected balance in today's dollars.

The 80% Rule and the 4% Rule

Two widely used rules of thumb simplify retirement planning. The "80% rule" holds that an income of roughly 70–80% of your pre-retirement income is usually enough to maintain your standard of living after you stop working, since certain costs (commuting, retirement contributions themselves, payroll taxes) disappear. Someone earning $100,000/year might therefore target $70,000–$80,000/year in retirement income.

The "4% rule" translates a target retirement income into a savings goal: divide your desired annual income by 4% to estimate how much you need saved. For a $60,000/year target, that works out to $60,000 ÷ 0.04 = $1.5 million. It comes from research on how long a diversified portfolio can sustain 4%-per-year withdrawals (adjusted for inflation) without running out over a 30-year retirement — a useful sanity check alongside the more detailed month-by-month projection this calculator produces.

Where Retirement Income Actually Comes From

Personal savings are usually only one leg of retirement income. Social Security is designed to replace approximately 40% of a typical worker's pre-retirement income — meaningful, but rarely enough on its own. Employer-sponsored 401(k) plans often include a matching contribution up to a set percentage of salary; not contributing at least enough to capture the full match is effectively leaving free money on the table, since the match itself is an immediate, guaranteed return no investment can match.

Traditional 401(k)/IRA contributions are made pre-tax and grow tax-deferred, but withdrawals are taxed as ordinary income. Roth accounts work the opposite way — you contribute after-tax dollars, but qualified withdrawals in retirement are entirely tax-free. Beyond retirement accounts, pensions, rental income, dividends, and part-time or passive income can all supplement the balance this calculator projects.

About These Parameters

Current Age & Retirement Age

These two values determine the length of your accumulation phase — the number of years your contributions have to compound. Even a five-year difference here can change your projected balance by tens of thousands of dollars, since compounding accelerates in the later years of a long time horizon.

Life Expectancy

The age through which the withdrawal estimate spreads your balance. US life expectancy at birth is roughly 78–80 years on average, but someone who reaches 65 in good health often lives well into their 80s — planning conservatively (age 90–95) reduces the risk of outliving your savings.

Current Savings & Monthly Contribution

Current savings is the starting balance across all retirement accounts today. Monthly contribution should include both your own contributions and any employer match — the match is effectively free additional growth and should always be counted toward your total contribution rate.

Return Rate Before / During Retirement

Most financial plans use a higher growth-focused return rate (often 7–10%, based on long-run US stock market averages) while still contributing, then a more conservative rate (often 4–6%) once retired, reflecting a shift toward bonds and other lower-volatility assets that protect against needing to sell investments during a market downturn.

Expected Inflation Rate

Used only to convert your projected nominal balance into today's purchasing power — it does not change the nominal dollar projection itself. The long-run US average is about 2.6% per year, though any individual decade can run higher or lower.

Frequently Asked Questions