How the retirement calculator works
Retirement planning has two halves. First you save and invest while you work. Then you draw an income from those savings, while prices keep rising. The calculator models both.
- Saving phase. Your current savings and monthly contributions grow at the return you expect before retirement. Contributions go in at the end of each month and can rise once a year, for example in line with your pay.
- The income you need. You enter the yearly income you want in today’s money, minus Social Security, a pension or other income. The gap is what your savings must pay. It is raised with inflation until you retire.
- Withdrawal phase. Each year in retirement, the calculator takes that year’s withdrawal at the start of the year, lets the rest grow at your retirement return, and raises the next withdrawal by inflation. It reports whether the money lasts until the age you plan for.
The nest egg you need at retirement is the amount that runs to exactly zero at your planning age. With a first withdrawal W, inflation i, return r and n years:
If inflation equals your return, this simplifies to W × n: you need one year of spending for every year of retirement.
The 4% rule explained
In 1994 the financial planner William Bengen tested withdrawal rates against US stock and bond returns since 1926. He looked at someone who takes a fixed percentage of their savings in the first year of retirement, then raises that dollar amount with inflation every year, whatever the markets do.
His finding: a first-year withdrawal of 4% never ran out in under 33 years in any of the historical periods he tested, with half the money in stocks and half in intermediate-term government bonds. He suggested holding between 50% and 75% in stocks. The idea became known as the 4% rule.
It gives two handy shortcuts.
Savings needed ≈ yearly income needed from savings × 25
Example. You need $40,000 a year from savings. The 4% rule says you need about 25 × $40,000 = $1,000,000. Once retired, you take $40,000 in year one, then raise it with inflation: $41,200 the next year at 3% inflation, and so on.
Keep its limits in mind:
- It was designed for a 30-year retirement. If you retire at 50, a lower rate such as 3% to 3.5% is safer.
- It is based on US history. Future returns could be lower, and other countries have had worse markets.
- It ignores taxes and fees. A 1% yearly fee eats a quarter of a 4% withdrawal.
- It is rigid. Real retirees cut back after bad years, which makes savings last longer.
The calculator shows the 4% rule income next to the exact income your plan can sustain, so you can compare the two.
Worked example
Take a 40-year-old with $100,000 saved who puts away $1,000 a month and raises that by 2% a year. They want $60,000 a year in retirement (today’s money) and expect $24,000 a year from Social Security, so savings must provide $36,000. They plan to retire at 67 and want the money to last to 95. They assume 6% returns before retirement, 4.5% after, and 2.5% inflation.
| Result | Future money | Today’s money |
|---|---|---|
| Savings at 67 | $1,442,305 | $740,479 |
| First-year withdrawal | $70,121 | $36,000 |
| Needed at 67 to last to 95 | $1,531,036 | $786,033 |
| Income the savings can sustain | $33,914 a year | |
| 4% rule income | $29,619 a year |
The plan falls a little short: the money runs out at 92. Saving about $92 more a month now closes the gap. So would retiring a year or two later, spending a bit less, or delaying Social Security to get a larger benefit.
Tips for a stronger plan
- Start early. $500 a month for 40 years at 6% grows to about $954,000. Twice as much, $1,000 a month, for only 20 years reaches about $453,000.
- Plan for a long life. Many people live into their 90s. Planning to 95 protects you, and the SSA life expectancy calculator gives a personal estimate.
- Use realistic returns. Test a cautious case, such as 4% before and 3% after retirement. If the plan only works at 8%, it is fragile.
- Remember inflation. At 2.5% a year, prices roughly double in 28 years. See how prices have changed with the inflation calculator.
- Use tax-advantaged accounts. A workplace 401(k) with an employer match is often the best place to start. The 401(k) calculator includes the 2026 limits and catch-up rules.
- Review every year. Update your savings, spending and expected Social Security, and adjust.
For growth on a single savings pot, the compound interest calculator shows the same maths in more detail. This calculator gives estimates for planning and education. It is not financial advice, and it does not include taxes.