Retirement calculator

The calculation runs month by month in two phases.

Saving years. Your balance grows at the monthly equivalent of the annual return you enter, and your contribution is added at the end of each month.

Retirement years. The income gap is the yearly income you want minus Social Security, pensions and other income. It is entered in today's dollars, so the calculator first grows it with inflation to the year you retire. From then on you withdraw that amount every month, rising with inflation each year, while the remaining balance earns the return you set for retirement.

The amount you need is the sum needed at retirement to fund every withdrawal until the age you plan for. If your projected savings fall short, the calculator shows the shortfall and the extra monthly contribution, from now until retirement, that would close it. It also shows the age when the money would run out at your current saving rate.

Using the default values: age 35, retiring at 67, planning to age 90, $50,000 saved, $800 a month, 6% return before and 4% during retirement, 3% inflation, a $60,000 income goal and $24,000 a year from Social Security.

1. Projected savings at 67: about $1,218,954.
2. The $36,000 gap in today's dollars becomes about $92,703 in the first year of retirement after 32 years of 3% inflation.
3. Funding that from 67 to 90 takes about $1,906,404.
4. Shortfall: about $687,450, which an extra $613.60 a month from now would cover.

Without the extra saving, the money would last until about age 81. Small changes matter: retiring two years later, or saving a little more in your thirties, does more than the same change made at 60.

Age 45, retiring at 65, planning to 90, $150,000 saved, $1,200 a month, 5% return before and 4% during retirement, 2.5% inflation, a $70,000 goal with $30,000 from Social Security.

• Projected savings at 65: about $884,960.
• First-year withdrawal: about $65,545 (the $40,000 gap after 20 years of inflation).
• Needed at 65: about $1,370,367, a shortfall of about $485,407.
• Extra saving to close it: about $1,196 a month.

With 20 years to go, closing a gap takes much bigger monthly amounts than it does from 35, because there is less time for growth to do the work.

The result is only as good as the inputs, and the most important ones are guesses about the future:

• Returns. Nobody knows future returns. A mix of stocks and bonds has historically earned more than cash but with large swings from year to year. Many planners use cautious figures, and a lower return in retirement, when portfolios usually hold more bonds. Try a pessimistic and an optimistic case.
• Inflation. The Federal Reserve targets 2% a year over the long run; actual inflation has been higher in some periods. The Bureau of Labor Statistics publishes the Consumer Price Index if you want to look at history.
• Social Security. Your estimated benefit depends on your earnings record and the age you claim. Get a personal estimate from your my Social Security account at ssa.gov rather than guessing.
• How long to plan for. Planning to 90 or 95 protects against outliving your money. Running out at 85 is a far bigger problem than having money left.

The calculator doesn't model taxes. Withdrawals from a traditional 401(k) or IRA are generally taxed as income, while qualified Roth withdrawals are not, so plan for the tax on traditional accounts in your income goal.

• Save more, earlier. Every dollar saved at 35 has decades to grow. Make sure you get the full employer match in your 401(k), as it is part of your pay.
• Use tax-advantaged accounts. 401(k), 403(b) and IRA contributions have annual limits that the IRS adjusts most years, with higher catch-up limits from age 50. Check the current limits on irs.gov.
• Work a little longer. Retiring later adds saving years, shortens the period you need to fund, and raises your Social Security benefit if you delay claiming.
• Lower the income goal. Paying off a mortgage before retirement, or downsizing, can reduce the income you need.
• Review once a year. Update the numbers with your real balance and contributions. The link saves all your inputs, so you can bookmark it and pick up where you left off.

It uses a steady return every year. Real markets go up and down, and a bad market in the first years of retirement can hurt more than the same drop later (sequence-of-returns risk). It doesn't include taxes, required minimum distributions, health care costs, long-term care, or changes in spending as you age. For a full plan, a fee-only financial planner can model these. This is an estimate for planning, not financial advice.