How to Use This Calculator
This page bundles the four questions most retirement planning starts with. Pick the tab that matches what you want to know. Results update as you type.
- Accumulation ??given your current age, savings, and a monthly contribution, project the balance at retirement. The inflation field converts the nominal result into today's purchasing power so you can compare meaningfully against current expenses.
- Withdrawal ??given a starting nest egg and an annual withdrawal that grows with inflation, see how many years the portfolio lasts under a given return assumption.
- Goal Seek ??given a target balance and a time horizon, solve for the monthly contribution that gets you there. Switch to "Today's $" to keep the goal pinned to current purchasing power.
- Safe Withdrawal ??apply a withdrawal rate (the 4% rule is the historical baseline) to a balance and see the portfolio's projected path over a fixed horizon.
Every tab uses a constant-return assumption. Real markets are volatile, so the same average return can produce very different paths ??see the section on sequence-of-returns risk below.
Compound Growth and Retirement
Retirement saving works because contributions compound for decades. A dollar invested at 25 has roughly four decades of growth ahead of it; the same dollar invested at 45 has half that. The future value of a series of monthly contributions, when the rate is constant, follows the annuity formula:[1]
The Accumulation tab applies this month by month and adds the growth of any existing balance. Setting a "Contribution growth" greater than zero increases each year's monthly contribution by that percentage ??a rough proxy for raises that flow into savings.
The 4% Rule and Safe Withdrawal Rates
The "4% rule" comes from William Bengen's 1994 study of historical U.S. market returns. Bengen found that a retiree holding roughly 50??5% stocks and the rest in bonds could withdraw 4% of the starting balance in year one, adjust that dollar amount upward for inflation each year, and survive every rolling 30-year window in the historical record.[2] The Trinity Study (1998) reached similar conclusions across a broader range of portfolios.[3]
The rule is a guideline, not a guarantee. It is based on U.S. market history; future returns may be lower, and longer retirement horizons (early retirees planning for 40+ years) typically require a lower starting rate ??often 3.0??.5%. The Safe Withdrawal tab lets you stress-test any rate against any horizon and return assumption.
Inflation and Real Returns
Most calculators quote a nominal rate of return. The real rate strips out inflation and represents change in purchasing power. The Fisher equation links the two:[4]
U.S. inflation has averaged roughly 3% per year over the long run, but with substantial variation.[5] A $1,000,000 nest egg sounds like a lot today, but at 3% inflation over 35 years it has the purchasing power of about $355,000 in today's money. The Accumulation tab shows both numbers so you can plan against the figure that matters: real purchasing power at retirement.
Sequence-of-Returns Risk
Two retirees with the same average return can end up in very different places if the order of returns differs. A portfolio that suffers a bear market in the first few years of retirement ??while withdrawals are still being taken ??may never recover, even if the long-run average is identical to a portfolio that started in a bull market.[6] This is called sequence-of-returns risk and is the main reason 4% (rather than the average historical real return of about 6??%) is the accepted starting point for safe withdrawals.
A constant-return calculator like this one cannot model sequence risk. To stress-test, run the Withdrawal tab again with a return 1?? percentage points lower than your central estimate; if the portfolio still lasts your planning horizon, you have some cushion.
Common U.S. Retirement Accounts
401(k) and 403(b)
Employer-sponsored. Contributions are typically pre-tax (traditional) or post-tax (Roth). The 2024 employee contribution limit is $23,000, plus a $7,500 catch-up for those 50 and over.[7] Many employers match a percentage of contributions ??that match is, in effect, an immediate return on the dollars you contribute.
Individual Retirement Account (IRA)
Available to anyone with earned income, subject to limits. The 2024 contribution limit is $7,000 ($8,000 with catch-up). Traditional IRA contributions may be tax-deductible; Roth IRA contributions are after-tax but qualified withdrawals (including all growth) are tax-free.[7]
Health Savings Account (HSA)
Triple tax advantage when paired with a high-deductible health plan: pre-tax contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses. Often used as a stealth retirement account because after age 65, non-medical withdrawals are taxed like a traditional IRA.
Social Security and Pensions
Social Security is designed to replace roughly 40% of pre-retirement earnings for an average worker, less for higher earners.[8] The earliest age to claim is 62 (with permanently reduced benefits); full retirement age is 66 or 67 depending on birth year; benefits grow about 8% per year for each year you delay past full retirement age up to age 70. Defined-benefit pensions, where available, can cover a meaningful portion of retirement income. This calculator does not include either ??add expected Social Security or pension income as a reduction to the Annual Withdrawal needed from your portfolio.
Frequently Asked Questions
What return rate should I use?
U.S. stocks have averaged about 10% nominal / 7% real over the last century. A diversified portfolio with bonds is typically modeled at 5??% nominal during accumulation and 4??% during drawdown (lower because retirement portfolios usually shift toward bonds). Pick a rate you can live with even if it disappoints ??and try the calculator at one point lower for safety.
Should I plan in nominal or real dollars?
For accumulation, both are useful: nominal lets you compare against published account balances, real tells you whether the number actually supports your lifestyle. The Goal Seek tab lets you target either.
What does "Withdrawal timing" mean?
Whether you remove the year's withdrawal at the start (typical for monthly retirees who need cash) or at the end (for modeling). Start-of-year is more conservative ??the withdrawn cash misses that year's return.
Why does my portfolio last forever at some inputs?
If your annual withdrawal is less than what the portfolio earns each year, the balance grows even after withdrawals. The Withdrawal tab caps its projection table at 60 years and labels this case explicitly.
References
- [1] Wikipedia, "Future value" ??annuity formula (CC BY-SA 4.0). en.wikipedia.org/wiki/Future_value
- [2] Bengen, W.P. (1994), "Determining Withdrawal Rates Using Historical Data," Journal of Financial Planning.
- [3] Cooley, Hubbard, Walz (1998), Trinity University ??"Retirement Savings: Choosing a Withdrawal Rate That Is Sustainable."
- [4] Wikipedia, "Fisher equation" (CC BY-SA 4.0). en.wikipedia.org/wiki/Fisher_equation
- [5] U.S. Bureau of Labor Statistics ??CPI. bls.gov/cpi
- [6] Wikipedia, "Sequence risk" (CC BY-SA 4.0). en.wikipedia.org/wiki/Sequence_risk
- [7] U.S. Internal Revenue Service ??Retirement Topics. irs.gov/retirement-plans
- [8] U.S. Social Security Administration ??Benefit Calculation. ssa.gov/benefits/retirement
Educational content on this page is original prose written for MODOO. Material referenced from Wikipedia is used under the CC BY-SA 4.0 license.