Retirement Savings Calculator

How the retirement savings projection works

The calculator runs two separate phases: accumulation (saving toward retirement) and decumulation (spending down savings in retirement).

Phase 1: Accumulation

Starting from your current savings, the calculator compounds your balance annually at the pre-retirement return rate and adds your contribution for that year. Your contribution grows each year by the contribution increase rate (modeling cost-of-living adjustments).

For each year from current age to retirement age:
balance = balance x (1 + pre-retirement rate) + contribution
contribution = contribution x (1 + annual increase rate)

Phase 2: Decumulation

Once retired, the calculator estimates how long your savings will last. Your annual spending minus your annual Social Security income gives the annual drawdown from savings. If Social Security covers all spending, savings last indefinitely. Otherwise, using a constant-rate drawdown formula:

annual drawdown = (monthly spending x 12) - (monthly SSA x 12)
r = post-retirement annual return rate
years = ln(drawdown / (drawdown - balance x r)) / ln(1 + r)

This formula is the present-value annuity solve: the number of periods a lump sum can sustain a fixed annual withdrawal at a given return rate.

Worked example (default values)

Age 35, retiring at 65, starting savings $50,000, contributing $10,000/year growing at 2%/year, 7% pre-retirement return:

1. Year 1: $50,000 x 1.07 + $10,000 = $63,500
2. Year 2: $63,500 x 1.07 + $10,200 = $77,945
3. ... compounding for 30 years ...
4. Projected balance at age 65: approximately $1,370,000 (see calculator for exact figure)

Decumulation with $5,000/month spending, $1,500/month SSA, 5% post-retirement return:

1. Annual spending: $5,000 x 12 = $60,000
2. Annual SSA income: $1,500 x 12 = $18,000
3. Annual drawdown from savings: $60,000 - $18,000 = $42,000
4. Years = ln(42,000 / (42,000 - 1,370,000 x 0.05)) / ln(1.05) = approximately 37 years

Important assumptions

Every assumption in this calculator is user-editable because real outcomes depend on factors that cannot be predicted. The defaults are starting points only.

The 7% pre-retirement return reflects the long-run historical average real return of US equities, as frequently referenced in academic and government retirement planning literature. It does not represent any guarantee. Actual returns will vary year to year, and sequence-of-returns risk (poor returns early in retirement) can significantly affect outcomes.

The 5% post-retirement return is lower, reflecting that many retirees shift toward a more conservative, balanced allocation to reduce volatility once they are drawing down savings.

The 2% annual contribution increase models a cost-of-living adjustment to your annual savings. If your income does not increase, set this to 0%.

The Social Security default of $1,500/month is a placeholder. Your actual benefit depends on your earnings history and the age at which you claim. Obtain your personal estimate from the SSA Retirement Estimator at ssa.gov.

The 4% rule as a reference point

The 4% rule suggests withdrawing 4% of your portfolio value in your first year of retirement, then adjusting that amount for inflation each year. It was derived from historical research (the "Trinity Study") showing this withdrawal rate historically sustained a portfolio for at least 30 years across most historical US market scenarios.

This calculator shows the 4% rule figure as a reference only: it is not a recommendation. Limitations include:

• It was calibrated to a 30-year retirement; longer retirements may require a lower rate.
• It assumes a diversified US stock and bond portfolio, not cash or other allocations.
• Future returns and inflation may differ from historical experience.
• It does not account for individual tax situations, healthcare costs, or unexpected expenses.

The Social Security Administration discusses income planning strategies at ssa.gov/retirement.