How the retirement projection works
- Growth until retirement. Your current savings and monthly contributions grow at the expected annual return (converted to an equivalent monthly rate).
- Adjust for inflation. The projected balance is divided by (1 + inflation)years to show its value in today’s money.
- Sustainable income. The balance in today’s dollars × withdrawal rate gives the yearly income your savings can reasonably support.
- Target. Your desired income ÷ withdrawal rate is the nest egg you need. The calculator also works out the monthly contribution required to reach it.
Nest egg = S × (1 + i)m + C × ((1 + i)m − 1) ÷ i
Target (today’s $) = Desired income ÷ Withdrawal rate
Target (today’s $) = Desired income ÷ Withdrawal rate
Example: At 35 you have $50,000 saved and add $800 a month. With a 7% return, by 65 you would have about $1.32 million. After 3% inflation that is worth about $542,000 in today’s dollars, supporting roughly $21,700 a year at a 4% withdrawal rate. To produce $60,000 a year you would need $1.5 million in today’s dollars — about $2,790 a month in contributions.
How to close a retirement gap
- Capture the full employer match in your 401(k) — it is an immediate return on your money.
- Increase contributions with each raise. Raising your saving rate by 1% a year is barely noticeable in your paycheck.
- Work a few more years. Each extra year adds contributions, adds growth and shortens the period your savings must last.
- Control investment costs. A 1% annual fee can reduce a 30-year balance by more than 20%.
This is a simplified projection with constant returns. Real markets fluctuate, and the order of returns near retirement matters. Consider speaking with a fee-only financial planner for a full plan.
Frequently asked questions
How much do I need to retire?
A common starting point is to divide the annual income you want from savings by a safe withdrawal rate. At 4%, $60,000 a year requires about $1.5 million (in today’s dollars). Social Security or a pension reduces the amount your savings must cover, so subtract those from your desired income first.
What is the 4% rule?
The 4% rule comes from historical U.S. market studies: withdrawing 4% of your portfolio in the first year of retirement, then adjusting for inflation, lasted at least 30 years in almost all historical periods. Retiring earlier or wanting extra safety suggests 3–3.5%.
What rate of return should I assume?
Long-term U.S. stock returns have averaged around 10% before inflation, bonds much less. A diversified portfolio is often modelled at 5–7% before inflation. Using a moderate figure and checking a pessimistic scenario gives a more reliable plan.
Why are results shown in today’s dollars?
A million dollars in 30 years will buy far less than today. Converting the projection to today’s dollars using your inflation assumption lets you compare it directly with your current cost of living.
Does this include Social Security?
No. Enter only the income you expect your savings to provide. Subtract expected Social Security or pension income from your total income need before entering it.