Retirement Calculator

Retirement calculator at a glance#

A retirement calculator estimates two things: the savings target you need to retire, and how much your current savings will grow by retirement. To set your target, take the annual income you want in retirement and divide it by 0.04 under the 4% rule, which is the same as 25 times that income. To project your savings, it uses the future value formula FV = PV (1 + R) raised to the power n, where PV is what you have now, R is your annual return, and n is the years until you retire.

A common starting point for the income you need is the 70 to 80% rule: aim to replace 70 to 80% of your pre-retirement earnings. So if you earn $60,000 a year, you might target about $48,000 a year in retirement (80% of $60,000). Dividing $48,000 by 0.04 gives a savings target of $1,200,000.

The 4% rule assumes you withdraw 4% of your savings in the first year, so each $1 of yearly income needs $25 saved. The future value side shows whether your current balance plus contributions will reach that target: $50,000 growing at 6% a year for 30 years becomes about $287,000 before you add any new contributions.

Enter your age, current savings, annual contributions, expected return and retirement age in the calculator above for the exact savings target and income projection. These are estimates: inflation, real returns, life expectancy and Social Security all shift the final number, so treat the result as a planning guide rather than a promise.

The formula behind the projection#

To project savings, the calculator uses the future value formula FV = PV (1 + R)^n. PV is your current balance, R is your annual rate of return as a decimal, and n is the number of years until you retire. Use a realistic return for your mix of investments, since a small change in R compounds into a large difference over decades.

How much you need to retire#

A common starting point is the 70 to 80% rule: plan to replace 70 to 80% of your pre-retirement income. If you earn $50,000 now, that points to roughly $35,000 to $40,000 a year in retirement. Some costs fall, like commuting, while others, like healthcare, often rise, so adjust the percentage to your own situation. To turn a target income into a savings goal, divide it by 0.04 under the 4% rule, which is the same as saving 25 times your yearly income.

How long your savings last#

Three things drive how long a balance lasts: the age you retire, how long you live, and your withdrawal rate. Retiring earlier means the same savings must stretch over more years. The 4% rule is the common guideline for the withdrawal rate, taking 4% of the balance in the first year and adjusting for inflation after that. A lower withdrawal rate makes savings last longer; a higher one risks running out.

Why inflation matters#

Inflation erodes what your money buys, so a fixed income loses ground over a long retirement. At a 3% annual rate, something that costs $100 today costs about $243 in 30 years. Build an expected inflation rate into the plan so the income figure holds its value in real terms.

Other income sources#

Personal savings rarely stand alone. Social Security provides a base that depends on your earnings history and the age you claim, with a larger monthly benefit if you wait. Some employers offer a pension with a guaranteed payout, and annuities can add a steady stream. Include these alongside your savings so the projection reflects all your retirement income, not just your accounts.

FAQ#

How much do I need to retire?#

Take the annual income you want and divide by 0.04, the same as multiplying by 25. For $48,000 a year, that is a target of $1.2 million. The 70 to 80% rule helps set that income figure from your current earnings.

What is the 4% rule?#

It suggests withdrawing 4% of your savings in the first year of retirement, then adjusting that amount for inflation each year after. It is a planning guideline, not a guarantee, and a lower rate is safer if you retire early or markets fall.

When should I start saving for retirement?#

As early as you can. Because returns compound, money invested in your 20s or 30s has far longer to grow than the same amount added in your 40s or 50s, even at the same rate.

How does Social Security fit into my plan?#

It provides a base income tied to your earnings record and claiming age. Claiming at full retirement age gives the full benefit, claiming earlier reduces the monthly amount, and waiting increases it.

Can I rely on just a 401(k) and Social Security?#

It may fall short. Adding an IRA or other investments spreads risk and can fill the gap between what those two sources provide and the income you want.

What mistakes should I avoid?#

The common ones are underestimating expenses, ignoring inflation, and overestimating returns. Use conservative assumptions and update the inputs as your finances change.