Retirement Savings Calculator

The formula

Savings at retirement = S × (1 + i)^m + C × ((1 + i)^m − 1) ÷ i, where S is current savings, C the monthly contribution, i the monthly rate (annual return ÷ 12) and m the months until retirement. The yearly income is that balance times the withdrawal rate. To express a future amount in today's money it is divided by (1 + inflation)^years.

Worked example

Age 35, retiring at 65, with 20,000 saved and 800 a month at 6%. After 30 years the balance is about 924,064. With 2.5% inflation that is worth about 440,541 in today's money. A 4% withdrawal rate gives about 36,963 a year, or roughly 17,622 a year (1,468 a month) in today's money.

Limitations

The projection uses a single constant return and inflation rate, and keeps contributions level. It ignores taxes, fees, employer matching, pensions and sequence-of-returns risk. The 4% withdrawal rate is a widely quoted guideline, not a guarantee.

What the six results mean

• Savings at retirement is the nominal balance on your retirement date, before inflation is taken into account.
• Savings in today's money divides that balance by the inflation that builds up over the years, showing what it could buy at current prices.
• Yearly income is the withdrawal rate applied to the balance, and the today's-money versions restate it, with a monthly figure for budgeting.
• Total contributed is your own money paid in, so the rest of the balance is growth.

A later start

Using the same plan but starting at 45 instead of 35, savings at retirement are 435,836.81, worth 265,978.54 in today's money. A 4% withdrawal gives 17,433.47 a year, or 10,639.14 in today's money. Ten fewer years of growth cost far more than ten years of contributions would have added.

Choosing a withdrawal rate

In the main example the pot is 924,063.54. A 3% withdrawal gives 27,721.91 a year and 5% gives 46,203.18. A lower rate leaves more margin if returns disappoint or retirement is long, while a higher rate spends the pot faster.