Retirement planning reduces to one question: will the money last? That depends on how much you save, what it earns, how long it compounds, what you withdraw, and what inflation does to that withdrawal along the way.
The 4% rule and what replaced it
The Trinity Study found that withdrawing 4% of a portfolio in year one, then adjusting that amount for inflation annually, survived 30 years in nearly every historical US period tested.
It is a useful anchor, not a law. It assumed a 30-year horizon, a roughly 50/50 stock-bond split, and historical US returns. Longer retirements, lower expected returns and higher fees all argue for something closer to 3.0–3.5%.
Target portfolio ≈ annual spending × 25 (the 4% rule) More conservative ≈ annual spending × 30 (3.3%)
Sequence of returns risk
Two retirees can experience identical average returns over 30 years and get completely different outcomes — because the order matters once you are withdrawing.
Poor returns in the first few years force you to sell more shares to fund the same spending, permanently shrinking the base that must recover. The same bad years occurring late do far less damage.
Common defences: holding one to three years of spending in cash or short bonds, reducing withdrawals in down years, and shifting toward a more conservative allocation approaching the retirement date.
Inflation over a long horizon
At 2.5% inflation, $1 today buys about 61 cents in twenty years and 48 cents in thirty. A pension fixed in nominal terms loses roughly half its purchasing power across a typical retirement.
This calculator reports both the nominal balance and its value in today's money, because the second number is what actually determines your standard of living.
Order of contributions
- Contribute enough to capture the full employer match — an immediate, guaranteed return.
- Clear high-interest debt; paying off 22% credit card debt beats any expected market return.
- Build three to six months of expenses in accessible cash.
- Fill tax-advantaged accounts to their annual limits.
- Invest the surplus in taxable accounts.
Worked example
Using the values pre-loaded in the calculator above:
| Input | Value |
|---|---|
| Current age (yrs) | 35 |
| Retirement age (yrs) | 65 |
| Plan through age (yrs) | 90 |
| Current savings ($) | 80000 |
| Monthly contribution ($) | 1000 |
| Return before retirement (%/yr) | 7 |
| Return during retirement (%/yr) | 4 |
| Inflation (%/yr) | 2.5 |
| Output | Value |
|---|---|
| Balance at retirement | $570,651.20 |
| Years to retirement | 30 |
| Total contributed | $360,000.00 |
| Investment growth | $130,651.20 |
| Sustainable monthly withdrawal | $3,012.11 |
| Withdrawal in today's money | $1,436.00 |
| Years of retirement funded | 25 |
Frequently asked questions
How much do I need to retire?
A common starting point is 25 times annual spending, corresponding to a 4% withdrawal rate. Adjust upward for early retirement, longer life expectancy or conservative return assumptions.
What percentage of income should I save?
Roughly 15% of gross income including any employer match is the usual guidance for someone starting in their twenties. Starting later requires more — closer to 25% from age 40.
What return should I assume?
Many planners use 6–7% before retirement and 4–5% after, reflecting a more conservative allocation. Lower assumptions produce plans that fail more gracefully.
When should I claim Social Security?
Claiming at 62 permanently reduces the benefit by up to 30%; delaying past full retirement age adds about 8% per year until 70. Delaying generally wins if you live past roughly 80 and can bridge the gap.