Retirement Calculator

How to Use the Retirement Calculator

Retirement planning is two projections compared against each other. One is the pot you are on track to build. The other is the pot your target income actually requires once inflation has had thirty years to work. The gap between them is the only number that matters.

1. Enter your age and retirement age. The difference between them is the compounding runway, and it is the single most powerful input on this page. Dragging retirement age from 65 to 67 usually closes more of a gap than any plausible increase in contributions.
2. Enter what you have saved. Everything earmarked for retirement — workplace pensions, personal accounts, tax-sheltered wrappers. Leave out your home unless you genuinely intend to sell it and downsize.
3. Enter your monthly contribution. Include employer contributions if you get them; they are part of what lands in the pot, and leaving them out understates your position significantly.
4. Set a return and an inflation rate. The return should be after fees. A common approach is to run the projection at your expected return, then again two percentage points lower, and plan against the pessimistic one.
5. Enter the income you want, in today's money. This is the input people get wrong most often — they enter a future figure and then double-count inflation. Enter what that lifestyle would cost today; the calculator inflates it for you and shows the result in the third tile.
6. Set a withdrawal rate. Four per cent is the conventional planning assumption. Lower it to 3.5% or 3% for a longer or more cautious retirement, and watch what that does to the required pot.

The table projects your balance by age, so you can see the years in which compounding starts doing more work than your contributions. That crossover typically arrives in your early fifties on these assumptions.

Retirement Formula

Three separate calculations, compared at the end.

The withdrawal rate is doing an enormous amount of work in the third line. Dividing by 4% multiplies the income figure by 25; dividing by 3% multiplies it by 33.3. That single assumption changes the required pot by a third, which is more than most people's entire contribution decision.

Example

Age 40, retiring at 65, $60,000 saved, $800 a month

Return 6%, inflation 2.5%, target income $35,000 in today's money, 4% withdrawal.

1. Months to retirement: 25 × 12 = 300. Monthly return: 0.06 ÷ 12 = 0.005.
2. Growth factor: 1.005³⁰⁰ = 4.464970.
3. Existing savings grow to 60,000 × 4.464970 = $267,898.19.
4. Contributions grow to 800 × ((4.464970 − 1) ÷ 0.005) = 800 × 692.9940 = $554,395.17.
5. Projected pot: 267,898.19 + 554,395.17 = $822,293.36.
6. Target income in 25 years: 35,000 × 1.025²⁵ = $64,888.04.
7. Pot required: 64,888.04 ÷ 0.04 = $1,622,201.09.
8. Shortfall: 1,622,201.09 − 822,293.36 = $799,907.73.

What actually closes a gap that size

Three levers, ranked by how much they move. Working five years longer takes the projected pot from $822,293 to about $1,165,000 while also cutting five years off the retirement being funded. Raising the contribution from $800 to about $1,954 a month closes it by contribution alone. Accepting a 5% withdrawal rate instead of 4% cuts the required pot to $1,297,761 — but at the cost of a materially higher chance of running out.

The realistic answer is usually a combination of all three plus a lower target income, which is why the calculator lets you move every input independently rather than handing you a single verdict.

How Much of a Retirement Plan Is Assumption

The withdrawal rate deserves more scepticism than it usually gets. The famous 4% figure comes from studies of historical US market returns over thirty-year retirements, and it describes a rate that survived the worst historical sequences — not a guarantee.

Reading down that column shows how much of a retirement plan is an assumption rather than a calculation. The difference between the top and bottom rows is $1.26 million on the same lifestyle. Nobody's contribution decision moves the answer that much.

The second thing worth reading carefully is the third tile — your target income in future money. At 2.5% inflation over thirty years, $45,000 of today's lifestyle costs $94,391. People routinely plan for a number like $60,000 in thirty years' time and are surprised when it buys roughly half what they imagined.

Finally, note that the projection assumes contributions stay flat in nominal terms. In reality most people's contributions rise with salary. If yours will, the projection here is conservative — but making it explicit by rerunning with a higher figure every few years is more reliable than assuming it will work out.

What the Projection Leaves Out

What this calculator deliberately does not model, and why each omission matters.

Sequence of returns. The projection assumes a steady 6%. Real markets deliver that as an average of very different years, and the order matters enormously once you start withdrawing: a bad first decade of retirement is far more damaging than the same decade later, because you sell more units at low prices. No single-rate calculator can show this. It is the main reason planners run Monte Carlo simulations rather than one line.

State and workplace pensions. Any guaranteed income you will receive reduces the pot you need. If you expect $18,000 a year from a state pension, subtract that from your target income before entering it — otherwise you are asking your own savings to fund income you will get anyway.

Tax. Withdrawals may be taxable, tax-free, or a mixture depending on the wrapper and the country. If your withdrawals will be taxed, enter a target income that is gross rather than net, or reduce the withdrawal rate to compensate.

Spending is not flat. Retirement spending commonly follows a U-shape: higher in the active early years, lower in the middle, higher again if care is needed. A single annual figure smooths over that, which is fine for planning and misleading if you treat it as a budget.

Two habits make this tool genuinely useful. Rerun it every year rather than every decade — the gap changes with contributions, returns and your own expectations. And always run a pessimistic version: two percentage points off the return and half a point off the withdrawal rate. If the plan survives that, it is a plan. The savings rate calculator is a useful companion, because it converts the required contribution into a share of income you can sanity-check against your budget.