How this retirement calculator works
- Saving years: your current savings grow at the pre-retirement return, and your monthly contribution is added each month until your retirement age.
- Income gap: the monthly income you want, minus Social Security and pensions, is the amount your savings must cover. It is raised by inflation every year, both before and during retirement.
- Spending years: from retirement until your planning age, that gap is withdrawn each month while the remaining balance earns the (usually lower) in-retirement return.
The nest egg needed is the present value of those rising withdrawals at retirement:
where W is the first monthly withdrawal, g monthly inflation, r the monthly return in retirement and n the number of months.
Example
A 35-year-old with $50,000 saved who adds $500 a month at 7% will have about $965,000 at 65. Wanting $5,000 a month in today’s money with $1,800 from Social Security leaves a $3,200 gap — about $7,770 a month by age 65 after 30 years of 3% inflation. Funding that to age 90 needs roughly $1.84 million, so this plan runs short around age 76.
The 4% rule
A popular rule of thumb says you can withdraw 4% of your savings in the first year of retirement, then adjust for inflation, with a high chance the money lasts 30 years. Divided by 12, that’s the “4% rule income” shown above. Put the other way, you need about 25 times your yearly spending gap.
How to close a shortfall
- Increase contributions, especially to capture any 401(k) employer match.
- Work a few years longer: you save more, savings grow longer and you withdraw for fewer years.
- Delay Social Security — benefits rise about 8% for each year you wait past full retirement age, up to 70.
- Plan for lower spending in retirement, such as a paid-off mortgage.
Related Retirement Planning & Tax-Advantaged Tools
Achieving financial independence requires establishing a target nest egg based on the 4% safe withdrawal rule. Maximize company match contributions with our 401k Calculator, model tax-free retirement growth using the Roth IRA Calculator, project government benefit entitlements with the Social Security Calculator, and track compound portfolio growth using our Compound Interest Calculator.
Frequently asked questions
How much do I need to retire?
A common starting point is 70–80% of your pre-retirement income. Subtract expected Social Security and pensions, and multiply the remaining yearly amount by about 25 for a rough nest-egg target.
What return should I assume?
Many planners use 6–7% before retirement for a stock-heavy portfolio and 4–5% in retirement as the mix shifts toward bonds. Lower assumptions give a safer plan.
Where can I find my Social Security estimate?
Create a my Social Security account at ssa.gov to see your personalized benefit estimates at ages 62, full retirement age and 70.