Retirement Calculator

The 4% Rule Explained

The 4% rule, developed by financial planner William Bengen in 1994, states that retirees can withdraw 4% of their portfolio in the first year of retirement, then adjust for inflation each year after. This strategy historically survived 30 years of retirement in 95% of all historical market periods tested, including the Great Depression and 2008 financial crisis. To use the 4% rule: divide your annual expenses by 0.04 to get your target retirement savings. If you need $40,000/year from savings (after Social Security), you need $40,000 ÷ 0.04 = $1,000,000. Some modern advisors suggest a 3.5% rule for more conservative planning, especially given longer life expectancies.

How Compound Interest Supercharges Retirement Savings

Starting early is the single most powerful retirement strategy. A 25-year-old investing $300/month at 7% return will have $948,000 at age 65 — from just $144,000 in total contributions. A 35-year-old investing the same $300/month will have only $453,000 at 65. Starting 10 years later means you accumulate less than half, despite contributing $108,000. Each decade of delay roughly requires doubling your monthly contribution to reach the same goal. The math is clear: time in the market beats timing the market, and starting today beats starting "when you have more money."

Retirement Savings by Age: Are You On Track?

Financial experts suggest these milestones: by age 30, save 1× your salary. By 40, save 3× your salary. By 50, save 6× your salary. By 60, save 8× your salary. By 67, save 10× your salary. If you earn $55,000, you should have $55,000 saved by 30, $165,000 by 40, $330,000 by 50, $440,000 by 60, and $550,000 by 67. If you are behind, increase your savings rate, delay retirement by 2-3 years (which has a massive compound effect), or both.

How Much Do You Need to Retire? The 4% Rule Explained

The 4% Rule states that you can safely withdraw 4% of your retirement portfolio in the first year, then adjust for inflation each subsequent year, and your money should last at least 30 years.

This means you need approximately 25× your annual retirement spending saved. If you plan to spend $60,000/year in retirement, you need $60,000 × 25 = $1,500,000. The 4% Rule comes from the Trinity Study (1998, updated 2011), which analyzed historical US stock/bond returns from 1926-2009 and found that a 50/50 stock/bond portfolio with 4% initial withdrawal rate survived 30 years in 96% of all historical periods. For a more conservative approach (longer retirement, lower risk tolerance), many financial planners now recommend 3.5% or even 3%, which requires 29× or 33× annual spending respectively.

How Compound Growth Builds Retirement Wealth

Compound interest is exponential, not linear — this means your money grows slowly at first but accelerates dramatically over time. Starting early is the single most powerful retirement strategy.

Retirement Accounts Compared: 401(k) vs IRA vs Roth

The biggest decision is Traditional (tax-deferred) vs. Roth (tax-free growth). Traditional saves taxes now; Roth saves taxes in retirement. If you expect higher tax rates in retirement, choose Roth. If lower, choose Traditional.

401(k)/403(b): Employer-sponsored, $23,500 contribution limit (2026), often with employer match. Pre-tax contributions reduce current taxable income. Money grows tax-deferred; withdrawals taxed as ordinary income in retirement.

Traditional IRA: $7,000 contribution limit (2026), $8,000 if over 50. Tax-deductible contributions if you meet income limits. Same tax-deferred treatment as 401(k).

Roth IRA: Same $7,000 limit. Contributions are after-tax (no deduction), but all growth and withdrawals are completely tax-free in retirement. Income limits apply: $161,000 single, $240,000 married filing jointly for full contribution (2026). No required minimum distributions (RMDs).

Optimal strategy for most people: (1) Contribute enough to 401(k) to get full employer match. (2) Max out Roth IRA ($7,000). (3) Go back and max out 401(k) ($23,500). (4) If you still have money to invest, use a taxable brokerage account. This creates tax diversification — having both pre-tax and after-tax money gives you flexibility in retirement to manage your tax bracket.

How to Catch Up on Retirement Savings After 40

If you're behind on retirement savings, you're not alone — the median 401(k) balance for ages 40-49 is only about $93,000, well below the $500K+ many need.

1. Use catch-up contributions. After age 50, you can contribute an extra $7,500 to your 401(k) (total $31,000) and an extra $1,000 to your IRA (total $8,000). This is $39,000/year in tax-advantaged savings.

2. Aggressively reduce expenses. The savings rate matters more than investment returns when you have fewer years until retirement. Saving 30% of income from age 45 can still build a substantial nest egg.

3. Delay Social Security. Each year you delay past 62 (up to 70) increases your benefit by ~8%. Waiting from 62 to 70 increases monthly benefits by ~77%. If you have other savings to live on, delaying Social Security is one of the best guaranteed "returns" available.

4. Consider part-time work in early retirement. Even $1,500/month from part-time work reduces the amount you need to withdraw from savings, potentially adding years to your portfolio's life. This "semi-retirement" approach is increasingly popular and can also provide social engagement and purpose.

What About Social Security?

Social Security replaces approximately 40% of pre-retirement income for average earners. It's a foundation, not a complete retirement plan.

You become eligible at 62 with reduced benefits, full retirement age (FRA) is 67 for those born in 1960+, and maximum benefits come at age 70. Average Social Security benefit in 2026 is approximately $1,900/month ($22,800/year). Maximum benefit at FRA in 2026 is approximately $3,900/month. The Social Security Trust Fund is projected to face challenges around 2033-2035, at which point benefits may be reduced to ~75-80% of current levels if Congress doesn't act. Planning tip: Include Social Security in your retirement calculation but don't depend on it entirely. This calculator lets you input expected Social Security income to see how it reduces the savings you need. Even a $1,500/month Social Security benefit reduces your required portfolio by $450,000 (using the 4% rule: $18,000/year ÷ 0.04).