Retirement Calculator

The most important retirement statistic: the average American has only about $87,000 saved for retirement (Vanguard's How America Saves) — but most experts estimate you need roughly $1–1.5 million for a comfortable 30-year retirement. The gap is enormous, and closing it requires understanding three concepts: the 4% rule, the cost of inflation, and the brutal power of starting early.

The 4% rule. Developed by financial planner William Bengen in 1994, the rule states you can safely withdraw 4% of your retirement portfolio in year one, then adjust for inflation each subsequent year, with historically low risk of running out of money over a 30-year retirement. On $1,000,000 that's $40,000/year or about $3,333/month. Reverse-engineer your target: take desired annual retirement income and multiply by 25.

Inflation quietly destroys purchasing power. At 3% annual inflation, $500,000 today will have the purchasing power of roughly $280,000 in 20 years. Your target must account for inflation in both how your savings grow and how much you'll need to withdraw. This is why staying invested in growth assets like diversified stock index funds is important even during retirement — pure cash loses to inflation every year.

Starting at 25 vs 35: a $400,000 difference. $200/month invested at 8% from age 25 to 65 grows to about $702,000. The same $200/month started at age 35 grows to only $298,000. Ten years of delay costs $404,000. Compound interest is unforgiving — every decade of delay roughly halves your outcome.

Account types — what to prioritize. First, contribute enough to your 401(k) to capture the full employer match (it's free money, an immediate 50–100% return). Next, fund a Roth IRA if your income qualifies — tax-free growth and withdrawals are extremely valuable, especially if you expect to be in a similar or higher tax bracket in retirement. Then go back to maxing the 401(k). Traditional IRA suits high earners or those expecting lower future tax brackets.

Sequence-of-returns risk. The order in which you receive investment returns matters most in the years just before and just after retirement. A 30% market drop in your first retirement year while withdrawing 4% can permanently impair the portfolio. Mitigations: hold 1–3 years of expenses in cash/bonds at retirement, consider a temporary higher equity glide path, and be willing to reduce withdrawals during major downturns.

Five actions anyone can take this week: (1) check that you're capturing your full employer match; (2) increase your contribution rate by 1% — you won't notice it in your paycheck but it compounds enormously; (3) consolidate old 401(k)s into a single IRA to simplify and reduce fees; (4) confirm your investments are in low-cost index funds, not high-fee actively managed funds; (5) set up automatic annual contribution increases — most plans support this with one click.

It is never too late to improve your retirement outlook. If you're starting late, the most powerful levers are working a few extra years (which both grows the portfolio and shrinks the withdrawal period), maximizing catch-up contributions after age 50, and delaying Social Security to 70 for benefits 77% higher than claiming at 62. Every dollar saved today matters.