How the Retirement Calculator Works
This calculator uses compound interest to project your retirement savings. Each year, your existing savings grow at the expected annual return, and your monthly contributions are added. The projection accounts for inflation to show results in today's purchasing power.
FV = PV × (1+r)^n + PMT × [(1+r)^n - 1] / r
FV = future value · PV = current savings · r = monthly return · n = months · PMT = monthly contribution
After you retire, each year's income need, minus Social Security or pension, comes out of the balance, and what is left keeps growing at the lower retirement return. Working in today's dollars means we subtract inflation from each return, so every number you see can be compared with prices now.
The 4% rule
The 4% rule (Bengen, 1994) suggests you can withdraw 4% of your portfolio per year in retirement with a high probability of your savings lasting 30+ years. This means a $1,000,000 portfolio supports $40,000/year or $3,333/month. The rule is a guideline, not a guarantee.
Turned around, it gives a quick target: the nest egg you need is about 25 times the yearly income your savings must provide. If you want $60,000 a year and Social Security covers $24,000, savings must cover $36,000, so the target is around $900,000.
Retirement Planning Benchmarks (Fidelity Guidelines)
| Age | Savings Target | Based on Annual Salary |
|---|---|---|
| 30 | 1× annual salary | e.g. $60,000 saved if earning $60,000 |
| 40 | 3× annual salary | e.g. $180,000 saved if earning $60,000 |
| 50 | 6× annual salary | e.g. $360,000 saved if earning $60,000 |
| 60 | 8× annual salary | e.g. $480,000 saved if earning $60,000 |
| 67 | 10× annual salary | e.g. $600,000 saved if earning $60,000 |
Retirement Account Types
401(k) / 403(b): Employer-sponsored plans. Contributions are pre-tax, reducing taxable income now. Annual contribution limit applies. Many employers offer matching: this is essentially free money.
Traditional IRA: Individual Retirement Account. Pre-tax contributions (income limits apply). Tax-deferred growth. Taxed on withdrawal in retirement.
Roth IRA / Roth 401(k): Contributions made with after-tax dollars. Growth and qualified withdrawals are completely tax-free. Excellent if you expect to be in a higher tax bracket in retirement.
In the UK the equivalents are a workplace pension (with tax relief and an employer contribution), a SIPP and the Lifetime or Stocks and Shares ISA. The State Pension plays the role of Social Security: enter your forecast from gov.uk in the pension field.
When to claim Social Security
You can claim from 62, but the benefit is cut permanently by up to 30%. Waiting past your full retirement age (67 for anyone born in 1960 or later) raises it by 8% for every year up to 70. For people in good health with other savings to live on, delaying is often one of the best guaranteed returns available.
Disclaimer: Projections use historical return assumptions and cannot predict future market performance. Consult a licensed financial planner (CFP) for personalised retirement advice.