On this page (11)
How to use this calculator#
- Add every retirement account togetherWorkplace plan, personal pension, IRA, ISA, old employer pots. Enter the combined balance. Leaving a forgotten pension out of the total is the most common reason a projection looks alarming when it should not.
- Include the employer match in the monthly contributionIf you pay 5% of a $70,000 salary and your employer matches it, that is $583 a month, not $292. A full match is an instant 100% return on that portion and belongs in the number.
- Choose nominal or real, then stay consistentEnter 7% and the answer is in future dollars. Enter roughly 4% — the return minus inflation — and the answer is already in today's spending power. Mixing the two is how people talk themselves into or out of retiring.
- Set a withdrawal rate you believe in4% is the standard starting point for a 30-year retirement from a diversified portfolio. Retiring in your fifties, or holding mostly cash, argues for 3% to 3.5% instead.
- Re-run it with the return two points lowerThe projection is a straight line through a market that is not. If the plan only works at 7% and collapses at 5%, that is a plan with no margin, and the fix is a higher contribution rather than a higher assumption.
The formula#
Future value of a lump sum plus monthly contributions
FV = P(1 + r)ⁿ + PMT × [ (1 + r)ⁿ − 1 ] ÷ r then Income = FV × w
- FV
- Projected balance at retirement
- P
- Amount saved today
- PMT
- Monthly contribution, including any employer match
- r
- Monthly return: annual return ÷ 12, as a decimal
- n
- Months until retirement: (retirement age − current age) × 12
- w
- Withdrawal rate as a decimal, e.g. 0.04 for the 4% rule
The result is nominal. To convert to today's money divide by (1 + inflation)^years — at 3% over 30 years that divisor is 2.427, so $1,462,967 is worth about $602,723 in current terms. The 4% figure is applied to the balance at retirement and then inflation-adjusted each year thereafter, not recalculated from the remaining pot.
How the projection is built#
Your existing balance compounds monthly at the return you enter, while every contribution joins the pot and begins compounding too. A 35-year-old with 60,000 saved who adds 800 a month at 7% until 65 finishes with roughly 1.46 million — only about 348,000 of that is money actually paid in. Three decades of compounding does the overwhelming majority of the work.
Delay costs far more than under-saving. Running the identical plan from age 45 instead of 35 produces around 659,000, well under half the total, even though lifetime contributions fall by just 96,000. Each year of delay has to be bought back later with a much larger monthly figure, which is why starting small beats waiting until you can start properly.
The 4% rule and where it breaks#
The 4% guideline comes from research showing a portfolio withdrawing 4% of its starting value, then adjusting that amount for inflation, historically survived at least 30 years. On 1.46 million that is roughly 58,500 a year before tax. It assumes a diversified stock and bond mix, US market history and a 30-year horizon — retire at 55 or hold mostly cash and a safer withdrawal rate is nearer 3%.
Inflation, tax and everything else you own#
This projection is nominal, so a million in 30 years buys roughly what 410,000 buys today at 3% inflation. Entering a real return instead — your expected return minus inflation, turning 7% into about 4% — puts the answer in today's money. Then remember what sits on top: state or social security pensions, employer matching, and any defined-benefit entitlement from earlier jobs.
Worked examples#
Thirty years of contributions at 7%
Age 35, $60,000 saved, $800 a month, retiring at 65.
- r = 0.07 ÷ 12 = 0.00583333; n = 30 × 12 = 360
- (1 + r)ⁿ = 1.00583333³⁶⁰ = 8.116497
- Existing savings: 60,000 × 8.116497 = 486,989.85
- Annuity factor: (8.116497 − 1) ÷ 0.00583333 = 1,219.9710
- Contributions: 800 × 1,219.9710 = 975,976.80
- FV = 486,989.85 + 975,976.80 = 1,462,966.65
$1,462,967 at 65. Contributions total $348,000, so growth accounts for 76% of the pot. At 4% that funds $58,519 a year.
The same plan starting ten years later
Identical inputs, but the saver begins at 45 with 20 years to run.
- n = 240; (1.00583333)²⁴⁰ = 4.038739
- Existing savings: 60,000 × 4.038739 = 242,324.34
- Contributions: 800 × [(4.038739 − 1) ÷ 0.00583333] = 416,741.32
- FV = 659,065.66
- Lifetime contributions fall from 348,000 to 252,000 — a difference of just 96,000
$659,066 instead of $1,462,967. Paying in $96,000 less costs $803,901 of final balance, because the money you never invested was the money with the longest runway.
Reference tables#
| Start age | Years invested | Total contributed | Balance at 65 | Growth |
|---|---|---|---|---|
| 25 | 40 | $240,000 | $1,312,407 | $1,072,407 |
| 30 | 35 | $210,000 | $900,527 | $690,527 |
| 35 | 30 | $180,000 | $609,985 | $429,985 |
| 40 | 25 | $150,000 | $405,036 | $255,036 |
| 45 | 20 | $120,000 | $260,463 | $140,463 |
| 50 | 15 | $90,000 | $158,481 | $68,481 |
| 55 | 10 | $60,000 | $86,542 | $26,542 |
Starting at 25 rather than 35 costs $60,000 more in contributions and produces $702,422 more at the end — roughly twelve dollars back for every extra dollar in.
| Annual income wanted | At 4% (25×) | At 3.5% (28.6×) | At 3% (33.3×) |
|---|---|---|---|
| $20,000 | $500,000 | $571,429 | $666,667 |
| $30,000 | $750,000 | $857,143 | $1,000,000 |
| $40,000 | $1,000,000 | $1,142,857 | $1,333,333 |
| $50,000 | $1,250,000 | $1,428,571 | $1,666,667 |
| $60,000 | $1,500,000 | $1,714,286 | $2,000,000 |
| $80,000 | $2,000,000 | $2,285,714 | $2,666,667 |
| $100,000 | $2,500,000 | $2,857,143 | $3,333,333 |
Subtract any state pension, social security or defined-benefit income first — you only need the pot to cover the shortfall, and that subtraction usually shrinks the target dramatically.
| Years to retirement | Inflation divisor at 3% | $1,000,000 nominal is worth |
|---|---|---|
| 10 | 1.344 | $744,094 |
| 20 | 1.806 | $553,676 |
| 30 | 2.427 | $411,987 |
| 40 | 3.262 | $306,557 |
This is why a seven-figure projection thirty years out is a comfortable retirement rather than a lavish one. Enter a real return instead of a nominal one if you would rather not do this step in your head.
Common mistakes#
- Treating the projection as a forecastA single average return hides sequence-of-returns risk: two bad years immediately after you retire do far more damage than the same two years in the middle of your career, because you are selling assets to live on. Model 5% as well as 7% and plan around the lower one.
- Reading a nominal number as spending power$1,462,967 in thirty years buys roughly what $602,723 buys today at 3% inflation. That is still a good outcome, but it is not the outcome most people picture when they see the headline figure.
- Ignoring fees, which come out of the returnA 1% annual charge on a 7% portfolio makes it a 6% portfolio. On this example that is the difference between $1,462,967 and $1,164,967 — $298,000 for one percentage point, taken quietly every year.
- Forgetting the pot is usually taxed on the way outWithdrawals from a traditional 401(k), IRA or most workplace pensions are taxable income. A $58,519 gross withdrawal is not $58,519 of spending money, and the gap is why the split between pre-tax and Roth or ISA-style accounts matters.
Frequently asked questions#
What return should I assume?
A globally diversified, equity-heavy portfolio has historically returned around 7% a year above inflation over long periods, with severe swings along the way. Many planners model 5-7% nominal for a balanced mix and reduce it as retirement nears.
Does this include employer matching?
Only if you add it. Include the employer contribution in your monthly figure — a full match on 5% of salary instantly doubles that portion of your saving.
How much do I need to retire?
A common rule of thumb is 25 times your desired annual spending, which is the 4% rule in reverse. Wanting 50,000 a year implies a target near 1.25 million.
Should I use the same return after I retire?
Most people shift toward bonds and cash in retirement, which lowers both expected return and volatility. Model the drawdown years with a more conservative rate than the accumulation years.
Key terms#
- The 4% rule
- Withdraw 4% of the portfolio's value in year one, then increase that dollar amount by inflation each year. Derived from US market history over 30-year retirements; it is a starting point, not a guarantee.
- Nominal vs real return
- Nominal is the raw percentage; real subtracts inflation. A 7% nominal return in a 3% inflation world is roughly a 4% real return.
- Sequence-of-returns risk
- The danger that poor returns arrive early in retirement. Identical average returns in a different order can exhaust a portfolio decades sooner.
- Employer match
- Money your employer adds when you contribute, commonly up to 3–6% of salary. Not claiming it in full is declining part of your pay.
- Safe withdrawal rate
- The percentage of a portfolio that can be drawn annually with a high probability of lasting the retirement. Falls as the horizon lengthens or the portfolio gets more conservative.
- Glide path
- The planned shift from equities toward bonds and cash as retirement nears, trading expected return for less volatility when you can least afford it.
Sources#
- Employment to retirement — investing across your working life — U.S. Securities and Exchange Commission (Investor.gov)
- Top 10 ways to prepare for retirement — U.S. Department of Labor, Employee Benefits Security Administration
- Retirement topics — contribution limits for 401(k) and IRA plans — Internal Revenue Service
- Retirement benefits and estimating your Social Security income — U.S. Social Security Administration
Figures last checked .
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