Retirement Savings Calculator

Retirement Savings: How Much Do You Really Need?

Planning for retirement is one of the most important financial decisions you will ever make. The earlier you start saving and the more consistently you contribute, the more time compound interest has to work in your favor. This calculator helps you project your retirement savings based on your current situation, expected returns, employer matching, and inflation.

The 4% Rule Explained

The 4% rule is one of the most widely cited guidelines in retirement planning. It states that you can withdraw 4% of your retirement portfolio in the first year of retirement, then adjust that amount for inflation each subsequent year, and have a high probability of your money lasting at least 30 years. For example, if you have $1 million saved, the 4% rule suggests you can safely withdraw $40,000 per year (about $3,333 per month) in retirement.

This rule originated from the Trinity Study, which analyzed historical stock and bond returns. While it remains a useful starting point, many financial advisors now recommend a more flexible approach, adjusting withdrawal rates based on market conditions and personal circumstances.

Understanding Employer Match

An employer match is essentially free money added to your retirement account. A common structure is a 50% match on up to 6% of your salary. This means if you earn $75,000 and contribute 6% ($4,500), your employer adds an additional $2,250. Not contributing enough to receive the full employer match is one of the most costly financial mistakes you can make. Always contribute at least enough to capture the full match before directing savings elsewhere.

Contribution Limits (2025)

The IRS sets annual limits on how much you can contribute to retirement accounts:

• 401(k) / 403(b): $23,500 employee contribution limit ($31,000 if age 50 or older with catch-up contributions)
• Traditional / Roth IRA: $7,000 per year ($8,000 if age 50+)
• Total 401(k) limit (employee + employer): $70,000

The Power of Starting Early

Consider this comparison to illustrate why starting early matters so much. If you begin saving $500 per month at age 25 with a 7% annual return, you will have approximately $1.2 million by age 65. If you wait until age 35 to start (saving the same $500 per month), you will have roughly $567,000. That 10-year delay costs you over $600,000 in lost growth, even though you only contributed $60,000 less. The lesson is clear: time in the market beats almost every other factor.

Inflation: The Silent Wealth Eroder

Inflation reduces the purchasing power of your money over time. At 3% annual inflation, $1 million in 30 years will only buy what roughly $412,000 buys today. This is why it is critical to look at both nominal (unadjusted) and real (inflation-adjusted) projections. Your investments need to grow faster than inflation just to maintain your purchasing power, let alone build real wealth.

Tips for Retirement Planning

1. Start now. The best time to start saving for retirement was yesterday. The second best time is today. Even small amounts compound significantly over decades.
2. Get the full employer match. This is the highest guaranteed return you will ever earn on an investment.
3. Increase contributions with raises. When you get a raise, direct at least half of the increase toward retirement savings.
4. Diversify your portfolio. A mix of stocks, bonds, and other assets appropriate for your age and risk tolerance helps manage volatility.
5. Consider Roth vs. Traditional. Roth contributions are taxed now but grow tax-free. Traditional contributions are tax-deferred. The right choice depends on whether you expect your tax rate to be higher or lower in retirement.