Retirement Calculator

Accumulation, then drawdown

The projection runs in two phases, and exactly one number passes between them. First the model accumulates: the current savings and every monthly contribution compound at the return entered for the years before retirement, producing the nest egg. Then it draws down: starting from that nest egg alone, it applies the retirement return and subtracts the monthly spending, month after month, until the balance reaches zero or the simulation window ends. Nothing else crosses the boundary — the contribution stops, the first return is replaced by the second, and the drawdown has no memory of how the nest egg was built.

In the worked example above — age 55 retiring at 65, $200,000 saved, $1,000 a month added at an assumed 6% return — phase one builds a nest egg of about $527,759, of which $320,000 is principal and the rest is growth. Phase two, spending $3,000 a month at an assumed 4% return, runs the balance down in about 22.2 years, around age 87.2. Every figure on this page is computed at build time by the same tested engine that runs the calculator, so the explanation cannot drift from the tool.

Phase one: the future-value formula

The accumulation phase is a closed-form calculation, the future value of a lump sum plus a level stream of contributions:

FV = P·(1+r)ⁿ + PMT·[((1+r)ⁿ − 1) / r]

P is the current savings, PMT the monthly contribution, r the before-retirement return divided by twelve, and n the number of months between the two ages — the retirement age minus the current age, times twelve. The first term compounds the starting balance for the whole period; the second is the annuity formula, which gives each contribution credit for the months remaining after it is made. Contributions are treated as arriving at the end of each month, and a 0% return collapses the formula to simple addition. These are the site-wide conventions documented on the methodology page.

Two of the three result lines come straight from this formula. The nest egg is FV. Total you contribute is P plus PMT times n — in the example, $200,000 plus $1,000 for 120 months, or $320,000. The difference, $207,759, is what the assumed return produced. Because the exponent n is in months, the formula is steeply sensitive to the accumulation period: in the second worked example below, a 35-year-old contributing $800 a month on $50,000 of savings at an assumed 7% reaches 65 with about $1,381,802, of which only $338,000 is principal and $1,043,802 is growth.

One limit of the phase is worth naming. The contribution is level in nominal dollars for the entire period — it does not rise with pay, and the inflation field does not touch it. A plan whose contributions grow with salary is the job of the 401(k) Calculator, which simulates salary growth month by month; here, a growing contribution can only be approximated by entering its average.

Phase two: the month-by-month drawdown

There is no closed form for a withdrawal that steps up once a year, so the second phase is simulated. Each month the engine does three things in a fixed order: it multiplies the balance by one plus the retirement return divided by twelve, subtracts the current withdrawal, and counts the month. After every twelfth month it multiplies the withdrawal by one plus the inflation rate, so the first twelve withdrawals are exactly the spending entered, the next twelve are that amount escalated once, and so on. With the inflation field blank, the withdrawal never changes and the loop is a level annuity in reverse.

The loop ends in one of two ways. If the balance reaches zero, the month count is the answer: how long it lasts is that count divided by twelve, and the depletion age is the retirement age plus the same figure. In the example the count is 266 months, hence 22.2 years and an age of 87.2. The final month is counted in full even though the balance typically covers only part of that last withdrawal, so the years figure is rounded up by a fraction of a month at most. Otherwise the loop stops when it reaches the engine's window of 80 years after retirement, and the balance is reported as never exhausted.

The clearest way to see what the growth step contributes is to remove it. At an assumed 0% return during retirement the drawdown is plain division — the nest egg divided by the monthly spending — and the $527,759 example lasts 176 months, about 14.7 years. At the assumed 4% it lasts 22.2 years, because every month the balance earns something before the withdrawal is taken. At an assumed 3% the figure is 19.4 years; at an assumed 5% it is 26.5. The spread between those results is the size of the return assumption's influence on this one plan, and it is the reason the retirement return is a separate input rather than a copy of the accumulation return.

"Never exhausted" versus a depletion age

Whether a level drawdown depletes at all comes down to a comparison inside the first month. Growth in any month is the balance times the monthly rate; if the withdrawal is no larger than that, the balance does not fall, the next month's growth is at least as large, and the balance is sustained indefinitely. If the withdrawal is larger, the balance falls, the next month's growth is smaller, and the gap widens — slowly at first, then quickly. For the never-exhausted example, one month's growth on the $1,381,802 nest egg at the assumed 5% is about $5,758, so spending of $5,000 a month sits below the crossover and the model reports the balance as never exhausted. For the depleting example the same arithmetic gives a crossover well under its $3,000 of monthly spending, which is why that plan runs out.

The 80-year window blurs the line slightly, and it is better to know that than to be surprised by it. A withdrawal just above the crossover erodes the balance so slowly that the window can end before the balance does, and the engine reports never exhausted for that case too: on the same nest egg, $5,800 a month is above the $5,758 crossover and still reports as never exhausted, while $6,500 a month depletes after about 43.5 years, around age 108.5. Both readings are honest descriptions of the simulation; neither is a forecast. A depletion age far beyond the retirement age says that under a constant assumed return the arithmetic takes that long to reach zero, and nothing more.

Worked example: a nest egg the model never exhausts

The contrasting case uses a longer accumulation and a smaller monthly contribution: age 35 retiring at 65, $50,000 already saved, $800 a month at an assumed 7% return, then spending $5,000 a month at an assumed 5% return with no inflation escalator. Phase one runs for 30 years — 360 monthly contributions — and produces a nest egg of about $1,381,802 on $338,000 of principal. Phase two starts from that balance and finds the withdrawal below the crossover, so the result reads "growth covers the withdrawals — the balance is never exhausted." The two examples differ in every input, which is the point: the one that never depletes has a smaller contribution and a larger spending figure than the one that does, and the difference is carried entirely by the 30-year exponent in the accumulation formula and by the ratio of spending to nest egg in the drawdown.

Worked example: the same plans with inflation switched on

The inflation field changes the drawdown's character, because a withdrawal that grows every year can overtake a growth figure that depends on a balance it is shrinking. With an assumed 3% escalator, the never-exhausted plan no longer is: the first year's $5,000 a month is below the crossover, but each annual step-up narrows the margin until the withdrawal exceeds the month's growth, after which the balance declines faster every year. The model reports depletion after about 31.8 years, around age 96.8. The depleting plan, already past its crossover, simply gets there sooner: 16.3 years instead of 22.2, so the depletion age moves from about 87.2 to about 81.3.

An escalated drawdown does not always deplete. Whether it does depends on a race between two compounding processes — the surplus growth reinvested while the withdrawal is still below the crossover, against the escalator raising the withdrawal — and the engine settles it by simulation rather than by formula. That is also why the inflation input is a single constant applied on a fixed annual schedule: it is a modeling assumption chosen for the example, not a claim about what inflation will be.

Worked example: two accumulation paths to one spending target

The accumulation formula's exponent can be seen in isolation by holding the drawdown fixed. Both plans below spend $4,000 a month at an assumed 4% return in retirement, start from $0 of savings, and accumulate at an assumed 7%. The first contributes $300 a month from age 25 to 65; the second contributes $1,200 a month — four times as much — from age 45 to 65.

The second plan puts in twice the principal and finishes with the smaller nest egg, because the first plan's early contributions compound through 480 months while the second's have at most 240. The drawdown then treats the two nest eggs identically — same spending, same return — so the gap in years is purely the gap in starting balance. This is a description of what the formula does with the exponent, not a recommendation about when to save; the table exists so the sensitivity is visible in engine output rather than asserted.

How the drawdown relates to the 4% rule

The drawdown here is the general form of the mechanic behind the 4% rule. The rule sets the first year's withdrawal at 4% of the starting portfolio and then adjusts that dollar amount for inflation each year, never consulting the balance again; the calculator does exactly that arithmetic for any starting withdrawal and any assumed inflation rate. On the never-exhausted example's $1,381,802 nest egg, a 4% start is $55,272 in the first year — $4,606 a month. Entered as the spending figure with the inflation field blank, that withdrawal sits below the crossover and the model reports never exhausted; with an assumed 3% escalator it reports depletion after about 35.8 years, around age 100.8.

What the two do not share is the evidence behind the number. The 4% figure summarizes historical back-tests — William Bengen's 1994 study and the 1998 Trinity study — that replayed actual sequences of returns over 30-year horizons under a fixed stock-and-bond mix. This calculator applies one constant assumed return, so its drawdown cannot show what a poor early sequence does to a plan, and its years figure is not a survival rate. The guide The 4% Rule: Where It Comes From and What It Assumes covers the origin, the exact mechanic, and the assumptions the studies held fixed; the Retirement Withdrawal Calculator computes the first-year figure for any initial rate from 2% to 6% and runs a runway calculation on a real return.

Reading the output

The result box shows three lines. The first is the nest egg at the retirement age, in nominal dollars — the site-wide convention is that balances are future dollars, and the way to see purchasing power in today's dollars is to enter a real (after-inflation) return for the accumulation phase. The second, "Total you contribute," includes the current savings, since the formula compounds that principal alongside the contributions; a reading that expects only the sum of monthly deposits will find the figure too large by exactly the starting balance. The third is either the years-and-age line or the never-exhausted sentence, and the years are counted from the retirement age, not from today — the accumulation years are not included.

Three further readings are easy to get wrong. The return during retirement is applied to the whole balance every month, including the last ones, so it is not a rate on the withdrawals but on whatever remains. The inflation escalator applies to spending only; a nest egg projected with a nominal return and drawn down with an inflation escalator is mixing a nominal accumulation with a real-terms spending pattern, which is a legitimate way to use the tool provided the mixture is recognized. And a fractional age is not a rounding error: the drawdown is counted in months, so 266 months reads as 22.2 years and an age of 87.2.

What the model does not include

The engine models growth and withdrawal arithmetic and nothing else. It does not model taxes, Social Security, pensions, investment fees, contribution or income limits, or sequence-of-returns risk — the fact that real returns arrive in an unpredictable order, and that a run of poor returns early in retirement, while withdrawals are being taken, does far more damage than the same returns later. A constant return shows the shape of the compounding and the drawdown, not the range of outcomes.

It also treats all savings as a single balance, which the tax code does not. Traditional 401(k) and IRA withdrawals are generally taxed as ordinary income, qualified Roth withdrawals are tax-free, and a taxable brokerage account pays tax along the way — so equal balances are not equal spendable money. The guide 401(k), Roth IRA, and Taxable Accounts: How They Fit Together lays out those mechanics, and the Retirement Planner projects the three account types separately with the same growth engine and reports the combined figure alongside the 4% rule's first-year amount. The statutory ages that structure a retirement — 59½, the Social Security claiming ages, Medicare at 65, required minimum distributions at 73 — are outside this model entirely; Retirement Age Milestones covers each one with its official source, and the guides index lists the rest.

Frequently asked questions

Not financial advice: a general educational estimate that assumes a constant rate of return and excludes taxes, Social Security, and market volatility. Your real results will differ. Values are processed locally in your browser and never transmitted. See the methodology page.