How this is calculated
The accumulation phase compounds your current balance forward at the expected return, and separately compounds each monthly contribution for the time it has remaining. Those two are added to give the projected balance at retirement.
The income phase applies a withdrawal rate to that balance and divides by twelve. A 4% rate on a $1,000,000 balance gives $40,000 a year, or about $3,333 a month.
Worked example: age 30, $50,000 saved, $500 a month, 7% return, retiring at 65. The existing balance grows to roughly $534,000 over 35 years. The contributions add roughly $830,000. Projected balance around $1,364,000, supporting about $4,550 a month at a 4% withdrawal rate.
Where the 4% rule comes from, and its limits
The 4% figure comes from research into historical US market returns suggesting that withdrawing 4% of the initial balance, adjusted for inflation each year, survived a 30-year retirement in nearly all historical periods.
It is a rule of thumb, not a guarantee. It assumes a particular asset mix, a 30-year horizon, and market behaviour resembling the past. Retiring early lengthens the horizon and argues for a lower rate; a pension or state benefit covering base expenses argues for a higher one. Treat it as a starting point to adjust, not a constant.
The two levers that actually move the number
Contribution amount and years of compounding dominate everything else. Adding $200 a month to the example above raises the projected balance by roughly $330,000. Retiring at 67 instead of 65 adds two more years of contributions and growth while shortening the withdrawal period from both ends.
Return rate matters too, but it is the one input you do not control. Planning around an optimistic return is how projections quietly fail; planning around a higher contribution is how they succeed. If the number here falls short, change what you save before you change what you assume.
Everything shown is in nominal terms. Over 35 years inflation substantially reduces what a given monthly income buys, so either subtract your inflation assumption from the return rate, or read the final income figure as future dollars rather than today's.
How to use the retirement calculator
- Enter your age and target retirement age. The gap between them is your compounding runway, and it is the most powerful input on the page.
- Add current savings and monthly contribution. Include employer matching in the monthly figure if you receive it — it compounds identically.
- Set the return and withdrawal rate. Use a conservative long-run return. Start at a 4% withdrawal rate and lower it if you plan to retire early.