Two stages: building it, then spending it
Retirement planning has two halves. Before you retire, your current savings and monthly contributions compound at your investing return. After you retire, you draw an income from the pot while what’s left keeps earning. This calculator models both — first your projected nest egg, then how many years it can fund your spending.
The 4% rule and the 25× number
A landmark study (William Bengen, 1994, later the “Trinity study”) found that withdrawing about 4% of your portfolio in the first year — then adjusting for inflation — let a balanced portfolio survive a 30-year retirement in almost every historical period. Flip it around and you get the 25× rule: the nest egg you need is roughly 25 times your first-year spending. Want $60,000 a year? Aim for about $1.5 million.
Why contributing early wins
Because growth compounds, money you invest in your 20s and 30s does far more heavy lifting than money added near retirement. Raising your monthly contribution — or your return assumption by even one point — moves the projected nest egg dramatically, while a later start has to be made up with much larger sums.
What this estimate leaves out
It assumes steady returns (real markets are volatile), treats spending as a level amount in retirement-start dollars, and excludes Social Security, pensions, taxes and healthcare costs. Social Security in particular can cover a meaningful slice of spending and reduce the nest egg you need. Use this as a planning range, not a guarantee.