How this calculator works
The gap is what your savings must pay each month. Savings needed = gap × 12 ÷ withdrawal rate; 4% is a widely used planning rule of thumb based on US market history, not a guarantee, and many planners use 3–4%. Everything is in today's dollars, so the return you enter should be after inflation.
- Monthly gap = monthly spending in retirement − guaranteed monthly income.
- Savings needed = gap × 12 ÷ withdrawal rate (4% means 25× the yearly gap).
- Projected savings = today's savings grown at the real return, compounded monthly; monthly saving to close the gap = shortfall × r ÷ ((1 + r)ⁿ − 1), with r the monthly real return and n the months to retirement.
Worked example
With these inputs: monthly spending in retirement $4,000; guaranteed monthly income $2,200; yearly withdrawal rate 4%; retirement savings today $150,000; years until retirement 20; yearly return after inflation 4%.
The result is monthly gap to fill from savings $1,800.00, with savings needed $540,000.00 and paid from savings per year $21,600.00. Returns are never guaranteed; re-run this each year with real balances.
Building the spending number
Start from what you spend now, then adjust: a paid-off mortgage lowers housing, commuting costs usually fall, and health care, travel and help around the house often rise. Many people use the Monthly Budget Calculator with retirement in mind to build the number line by line.
Keep everything in today's dollars. The calculator then asks for a return after inflation, which keeps the arithmetic honest without guessing future prices.
The 4% rule — and why it is only a rule of thumb
The 4% guideline comes from studies of historical US stock and bond returns: withdrawing 4% of the starting balance in the first year, then adjusting for inflation, lasted at least 30 years in most historical periods. It is not a guarantee. Longer retirements, lower expected returns or an early market fall argue for a lower rate, and many planners use 3% to 4%.
Try the calculator at 3.5% and 3% to see how much the nest egg moves. The difference is often the most useful number on the page.
Know your guaranteed income
Your Social Security estimate depends on your earnings record and the age you claim; claiming later raises the monthly benefit. The Social Security Administration shows your personal estimate in a my Social Security account. Pension statements show the monthly amount at each retirement age.
Sources
Frequently asked questions
How much do I need to retire?
Multiply the yearly gap between spending and guaranteed income by 1 ÷ the withdrawal rate. In the example — $4,000 a month spending, $2,200 guaranteed income, 4% withdrawal — the gap is $1,800 a month and the savings needed are $540,000.
Am I on track for retirement?
Add your savings, years to go and an after-inflation return. With $150,000 today, 20 years and a 4% real return, savings grow to about $333,387, and saving $563.32 a month closes the rest of the $540,000 target.
What withdrawal rate should I use?
4% is the widely quoted starting point; many planners use 3% to 4% for longer or more cautious retirements. A lower rate means a larger nest egg for the same monthly gap.
Should I include Social Security in my retirement budget?
Yes — it's guaranteed income that shrinks the gap. Use the estimate from your my Social Security account for the age you plan to claim, in today's dollars.
What return should I enter?
A return after inflation, because everything else is in today's dollars. Conservative planning often uses a few percent a year; entering 0% shows the most cautious case.