Retirement calculator

How does the retirement calculator work?

Each month your savings grow by the return you enter divided by 12, and then your contribution is added at the end of the month; the contribution rises once a year by the percentage you choose. With level contributions this is the standard annuity formula: balance = S × (1 + i)ⁿ + C × ((1 + i)ⁿ − 1) ÷ i, where S is your savings, C the monthly contribution, i the monthly return and n the number of months. Inflation compounds yearly, and dividing by (1 + inflation)^years gives today's dollars. Example: from 35 to 65 with $50,000 saved and $800 a month rising 2% a year at a 6% return, you reach $1,298,258 — $618,935 in today's dollars at 2.5% inflation. The numbers in the form are examples, not forecasts.

How much do I need to retire?

Divide the yearly income you want, in today's dollars, by the withdrawal rate. At 4% that is 25 times the income: $60,000 a year needs $1,500,000 in today's dollars, which is $3,146,351 after 30 years of 2.5% inflation. The calculator then shows the gap to your projected savings and the level extra amount to save each month (in the example $1,848,094 short in future dollars, $881,065 in today's, or about $1,840 more a month). The 4% rate is a historical rule of thumb, not a guarantee: William Bengen (Journal of Financial Planning, 1994) tested a 50/50 mix of U.S. stocks and intermediate-term Treasuries from 1926 and found 4% to be the highest first-year withdrawal, raised each year for inflation, that lasted 30 years in every period. In the Trinity study (Cooley, Hubbard and Walz, AAII Journal, 1998, Table 3), a 4% inflation-adjusted withdrawal lasted through 95% of the 30-year periods from 1926 to 1995 for a 50/50 portfolio and 98% for 75% stocks, but only 71% with 25% stocks. Both look at U.S. history only; a longer retirement, a different market or lower returns can call for a lower rate.

How is Social Security counted?

Enter your estimated monthly benefit in today's dollars — from your Social Security statement at ssa.gov or from the social security calculator. The calculator subtracts 12 times that amount from the income you want and sizes the savings goal for the rest: with $1,500 a month the example's goal falls from $1,500,000 to $1,050,000 in today's dollars. Benefits get a cost-of-living adjustment each year, based on the CPI-W (SSA), so the model keeps the benefit at the same purchasing power. It assumes the benefit starts at your retirement age; if you claim later, the years in between are not covered. Taxes on benefits are not modelled.

What return and inflation should I use?

No return is guaranteed: real returns go up and down from year to year and can be negative. The 6% return and 2.5% inflation in the form are examples, not forecasts — try several and see how the gap and the extra monthly saving change. The return is a yearly rate compounded monthly; inflation compounds once a year. Taxes and fund fees are not included.

How is this different from the 401(k), savings goal and withdrawal calculators?

Those answer one question each. The 401(k) calculator starts from your salary, employer match and the IRS limits. The savings goal calculator finds the monthly saving for a target you pick, and the future value calculator grows one amount or a regular deposit. The retirement withdrawal calculator starts where this one ends: how long a balance lasts. This planner joins them: what you will have, what your goal requires, the gap, and the extra to save each month.

Estimates for planning only — not financial advice. Your plan documents and a financial professional decide. Sources: W. Bengen, “Determining Withdrawal Rates Using Historical Data,” Journal of Financial Planning 7(4), 1994; P. Cooley, C. Hubbard and D. Walz, “Retirement Savings: Choosing a Withdrawal Rate That Is Sustainable,” AAII Journal, February 1998; Social Security Administration, cost-of-living adjustments. Related: Social Security, 401(k), savings goal, future value and retirement withdrawal calculators. How we check our calculators.