How This Calculator Works
This calculator has two phases: an accumulation phase (working years, from now until retirement) and a withdrawal phase (retirement).
In the accumulation phase, the calculator compounds your current savings and monthly contributions monthly (12 times per year) at your pre-retirement expected return. The formula used is:
At retirement, the calculator estimates your sustainable monthly income using two methods side by side: the 4% Rule and a fixed drawdown over your chosen retirement duration.
The 4% Rule: Origin and Explanation
The 4% rule comes from research by financial advisor William Bengen in 1994, later reinforced by the Trinity Study (1998) from Trinity University. Bengen analyzed US stock and bond returns from 1926 through 1994 and found that a retiree who withdrew 4% of their portfolio in the first year of retirement, then adjusted that dollar withdrawal upward for inflation each subsequent year, never ran out of money within 30 years — regardless of when they retired.
Nest egg at retirement: $1,000,000
First-year withdrawal: $1,000,000 × 4% = $40,000/year = $3,333/month
Year 2 withdrawal (3% inflation): $40,000 × 1.03 = $41,200/year
Year 3 withdrawal: $41,200 × 1.03 = $42,436/year
The portfolio continues to grow on its remaining balance during this time, offsetting withdrawals over a typical 30-year retirement.
Bengen's research covered portfolios with roughly 50–75% stocks and 25–50% bonds. More recent research (Pfau, Kitces) suggests that in today's lower interest rate environment and current market valuations, 3.3–3.5% may be a more conservative sustainable withdrawal rate for 30+ year retirements. The 4% rule remains the most widely cited benchmark, but it is a starting point for planning, not a guarantee.
The Drawdown Method
The second method this calculator shows is an annuity-style drawdown: the monthly payment that will exactly exhaust your nest egg over your chosen retirement duration at your chosen in-retirement return rate. This is the same math behind an annuity payment:
This method is more pessimistic than the 4% rule because it assumes your balance reaches exactly zero at the end of the period (no bequest) and does not inflation-adjust the withdrawal amount upward each year. For many people, the drawdown method produces a higher monthly figure than the 4% rule, reflecting the assumption that you'll spend down the principal completely.
Why Real (Inflation-Adjusted) Returns Matter
A 7% annual return when inflation is running at 3% is really only a 4% real return. This distinction is critical for retirement planning because your costs — housing, food, healthcare, travel — will all cost more in 20 or 30 years than they do today. A $3,000/month withdrawal that feels comfortable at retirement may feel significantly tighter at age 85 if prices have doubled.
This calculator shows both nominal figures (in future dollars) and inflation-adjusted figures (in today's purchasing power). The inflation adjustment converts your projected nest egg and monthly income back to what they'd feel like in current dollars, using your chosen inflation rate assumption. This is an assumption — actual future inflation is unknown. The Federal Reserve targets 2% inflation, but actual US inflation has ranged from 0% to over 14% in the past 50 years.
Honest Limitations of Any Retirement Projection
- Sequence-of-returns risk: If markets fall sharply in the first few years of retirement and you're withdrawing at the same time, you may sell assets at depressed prices and permanently impair your portfolio. The 4% rule's historical success assumes reasonably good early-retirement returns. A severe bear market at the wrong time can undermine even a well-planned retirement.
- Healthcare costs: US healthcare costs have historically inflated faster than general CPI. A couple retiring today may spend $300,000–$400,000 on healthcare in retirement (Fidelity Retiree Health Care Cost Estimate). This calculator doesn't model healthcare costs separately.
- Taxes on withdrawals: Traditional 401(k) and IRA withdrawals are taxed as ordinary income. Your gross withdrawal amount and your after-tax spending power are different. Required Minimum Distributions (RMDs) starting at age 73 force withdrawals whether you need them or not.
- Social Security: Social Security income is not modeled here. For most Americans, Social Security provides 30–50% of retirement income — it's a critical piece of the puzzle. Visit SSA.gov to see your projected benefit.
- Constant return assumption: Real returns are not smooth. This calculator assumes the same return each year. Actual market returns vary dramatically year to year.
Frequently Asked Questions
A simple starting point is the 25x rule: multiply your desired annual retirement spending by 25. This is the inverse of the 4% rule — if you plan to spend $60,000/year, you need $1.5 million. For $80,000/year, you need $2 million. This guideline applies to a 30-year retirement with a balanced portfolio. If you expect a longer retirement, plan for more (30× or higher for 35+ year retirements). Social Security and any pension income reduce the amount you need to save, since they cover part of your annual spending.
The 4% rule states that you can withdraw 4% of your retirement portfolio in the first year of retirement, then adjust that dollar amount for inflation each subsequent year, and historically your portfolio would have lasted 30 years through any market conditions in US history (1926–1994). It's based on Bengen's 1994 research and the Trinity Study. In practice, it's a starting guideline, not a guarantee. More conservative planners use 3–3.5% for longer retirements or in low-yield environments. More aggressive spenders who are flexible about reducing withdrawals in down markets may use 5%.
At a 4% withdrawal rate with a balanced portfolio (50–75% stocks), historical US data suggests your savings would have lasted 30+ years in virtually all historical periods. At a 5% withdrawal rate, some historical periods see shortfalls around year 20–25. At a 3% rate, your portfolio very likely grows even during retirement. The key variables are: your withdrawal rate, your portfolio's investment return, and how long you live. Use the drawdown section of this calculator to model different scenarios.
For pre-retirement growth: many planners use 6–8% for a diversified stock-heavy portfolio, recognizing that the US market has historically returned about 10% nominal (7% after inflation). During retirement, a more conservative 3–5% is typical for a balanced portfolio that may shift toward bonds. These are long-run averages — actual future returns could be higher or lower. Consider running this calculator at both an optimistic rate (7–8%) and a conservative rate (5–6%) to understand the range of possible outcomes.
Yes — Social Security is a meaningful income source for most Americans. The average monthly Social Security benefit in 2025 was approximately $1,900, and the maximum for a worker at full retirement age was around $4,018/month. Because Social Security is inflation-adjusted annually (COLA) and backed by the federal government, it provides income stability that a market portfolio cannot. To see your projected benefit, visit SSA.gov and create or log into your Social Security account. Subtract your projected monthly Social Security from your target monthly income to find out how much your portfolio needs to cover.