How the retirement savings calculator works
The calculator walks through every month until the age you want to retire. Each month your savings earn the expected return and your monthly contribution is added. Once a year the contribution rises by the increase you set, for example 3% to keep pace with raises. The return is a yearly rate: 7% means the balance grows 7% over a full year.
Starting at 35 with $50,000 saved and $500 a month at 7%, you would have about $965,339 at 65. You put in $230,000, and growth adds the rest. With 2.5% inflation that balance buys what about $460,218 buys today.
Time matters more than the amount. $500 a month from age 25 grows to about $1,235,771 by 65 at 7%. Starting the same $500 at 45 ends with about $253,768, about a fifth as much.
The 4% rule, explained carefully
The 4% rule says you can take 4% of your nest egg in the first year of retirement, then raise that dollar amount with inflation every year, and the money should last about 30 years. It comes from research in the 1990s, starting with a 1994 study by financial planner William Bengen, which tested this withdrawal plan against historical US stock and bond returns. In those past periods a 4% start held up for at least 30 years.
It is a rule of thumb, not a promise. It is based on one country’s past, assumes a mix of stocks and bonds, ignores fees and taxes, and covers 30 years. If you retire early or want a bigger safety margin, a lower rate like 3 or 3.5% is common. The order of returns matters too: a market drop in the first years of retirement does more damage than the same drop later, because you sell while prices are low.
Turned around, the rule gives a savings goal: divide the yearly income you need by the withdrawal rate. At 4% that is 25 times your yearly spending from savings.
| Withdrawal rate | Income from $1,000,000 | Needed for $3,000 a month |
|---|---|---|
| 3% | $2,500 / month | $1,200,000 |
| 3.5% | $2,917 / month | $1,028,571 |
| 4% | $3,333 / month | $900,000 |
| 4.5% | $3,750 / month | $800,000 |
| 5% | $4,167 / month | $720,000 |
The calculator also runs your own numbers: it draws the balance down with withdrawals that rise with inflation, at the return you expect in retirement, and shows how long the money lasts. It also shows the starting income that would use the money up exactly by the age you plan for.
Real vs nominal: today’s dollars and future dollars
Nominal amounts are the dollars on your future statement. Real amounts, or today’s dollars, take out inflation so you can compare them with prices now. At 2.5% inflation, prices roughly double in 28 years. A balance that looks large in 30 years buys about half as much as the same number today.
Plan with today’s dollars. The income goal mode asks for the monthly income you want in today’s dollars, grows it with inflation to your retirement age, and works out the balance and the monthly contribution you need to reach that savings goal.
How to use the retirement savings calculator
- 1Enter your current age, the age you want to retire, what you have saved and what you add each month. Add a yearly increase if your savings grow with your pay.
- 2Set an expected return and inflation. Open the retirement options to change the age you plan for, the return in retirement and the withdrawal rate.
- 3Read the balance at retirement, the monthly income it can pay and how long it lasts. Switch to the income goal mode to see what to save each month for the income you want.
Frequently asked questions
How much do I need to retire?
A common starting point is 25 times the yearly amount your savings must cover, which is the 4% rule turned around. If you want $40,000 a year from your nest egg, that is $1,000,000. Subtract what Social Security or a pension will pay first, because the savings only need to cover the gap. Use the income goal mode to turn a monthly income into a monthly savings amount.
Is the 4% rule safe?
It is a rule of thumb, not a guarantee. It comes from historical US stock and bond returns over 30-year retirements. Future returns can be lower, a crash early in retirement hurts more than one later, and a retirement longer than 30 years needs a lower rate. Many planners use 3 to 3.5% for early retirement and adjust spending in bad years.
What return should I use?
Nobody knows future returns. A mix of stocks and bonds is usually expected to earn less than an all-stock portfolio, and fund fees come off the top. Run the calculator with a cautious rate and an optimistic rate to see a range, and use a lower return for the years in retirement, when most people hold more bonds and cash.
Why does the result show today’s dollars?
Because prices rise. A million dollars in 30 years buys far less than a million today. The calculator divides future amounts by the inflation you enter, so you can compare the balance and the income with what things cost now. That is the number to plan with.
Does this include Social Security, taxes or fees?
No. It projects only these savings. Withdrawals from traditional 401(k) and IRA accounts are taxed as income, Roth withdrawals usually are not, and fees lower your return. These are estimates for planning, not financial advice, and returns are not guaranteed.