How it works
Retirement planning here is compound growth with a clock on it. The engine simulates every month from your current age to your retirement age: each month the balance earns one-twelfth of the annual return, then your contribution lands. With an annual step-up enabled, each year's monthly contribution scales by the step-up percentage — modelling raises that reach the retirement account before lifestyle inflation absorbs them. On the defaults — age 30, retire at 65 (35 years), $50,000 already saved, $500 per month contributed today, 7% expected return, 2% annual step-up — the projected retirement corpus is $1,701,785. Of that, $260,000 is money you personally deposited and $1,441,785 is investment growth. The growth slice is more than five times your contributions, which is the entire argument for starting early and stepping up with pay rises. The 7% assumption approximates the long-run US equity-market return before inflation; the SEC's investor.gov guidance treats such projections as planning ranges, not promises. A conservative 5–6% rate is sensible if you are near retirement or hold a bond-heavy mix, because sequence-of-returns risk matters most in the years just before and after you stop working. The 4% withdrawal rule — spending roughly 4% of the corpus in year one of retirement — implies this default corpus could support about $68,000 of first-year spending before taxes. Pair with the FIRE calculator for a leaner target, the 401(k) contribution calculator to model employer match, and the inflation calculator to express the corpus in today's dollars.
Formula
Each month: balance = balance × (1 + rate/12) + monthly contribution
Year y contribution = base monthly × (1 + stepUp/100)^(y−1)
Worked example — defaults (age 30 → 65, 7%, 2% step-up)
Retirement corpus = $1,701,785
Total contributions = $260,000
Investment growth = $1,441,785
Implied 4% withdrawal ≈ $68,071/year
Tips
- Capture employer match before fine-tuning the return assumption — match is a 50–100% instant return the model cannot replicate.
- A 2% annual step-up mirrors typical pay raises; even 1% compounds into a materially larger corpus over 35 years.
- Re-run after every raise and route half the increase to contributions before the budget absorbs it.
- Near retirement, stress-test at 5% growth — the gap between 5% and 7% over a decade is six figures on these defaults.
- Express the target in spending, not corpus: divide annual expenses by 0.04 (or 0.035 conservatively) to get the number you need.
Frequently asked questions
- How much will I have at retirement on the defaults?
- About $1,701,785 at age 65, from $50,000 starting balance plus monthly contributions that begin at $500 and step up 2% each year, compounded at 7% for 35 years.
- What return rate should I use?
- 6–8% is a common long-run assumption for a diversified stock-heavy portfolio before inflation; after inflation, plan on 4–6%. Use the lower end within ten years of retirement.
- What does the 2% step-up do to the outcome?
- It raises the monthly contribution by 2% every year — $500 becomes $510 in year two, $520.20 in year three, and so on. That adds roughly $100,000+ of extra contributions over 35 years versus a flat $500, and those later dollars still compound for years.
- How does this relate to the 4% rule?
- Divide your expected annual spending by 0.04 to get a corpus target. On the default output, $1,701,785 × 4% ≈ $68,071 of first-year retirement spending. The rule is a planning anchor, not a guarantee — many planners use 3–3.5% for longer retirements.
- Does this include Social Security or a pension?
- No. The engine sees age, savings, contributions, return and step-up only. Subtract expected Social Security or pension income from your spending need before dividing by 0.04 to find the portfolio target this calculator should hit.