Retirement calculator

How the corpus is calculated, step by step

Take someone aged 35 who wants to retire at 65 and plan to 90, on 3,000 a month at today's prices, with 2.5% inflation, a 6% return while saving, 4% during retirement and 40,000 already saved.

1. Spending at retirement: 3,000 × 1.025^30 = 6,292.70 a month.
2. Monthly rates that compound exactly to the yearly ones: g = 1.025^(1/12) − 1 = 0.20598% for inflation and j = 1.04^(1/12) − 1 = 0.32737% for the return.
3. Ratio of one month's withdrawal to the next, in present-value terms: q = (1 + g) ÷ (1 + j) = 0.998790. Over 300 months, q^300 = (1.025 ÷ 1.04)^25 = 0.695446.
4. Corpus, the sum of 300 rising withdrawals discounted to age 65: 6,292.70 × (1 − 0.695446) ÷ (1 − 0.998790) = 1,583,935.15.
5. Current savings at 65: 40,000 × 1.06^30 = 229,739.65, leaving a gap of 1,354,195.51.
6. Monthly saving: the gap divided by the value of 360 start-of-month deposits of 1 at i = 1.06^(1/12) − 1, which is 979.2565, gives 1,382.88.

At today's prices the corpus is 755,129.50. It is also 21.0 times a year of spending at the first month's rate (12 × 6,292.70 = 75,512.43), and that multiple is what rules of thumb such as the 4% rule state.

Corpus as a multiple of annual spending

The corpus depends on only two things once spending is fixed: the years in retirement and the real return, which is (1 + return) ÷ (1 + inflation) − 1. The worked example's 4% return and 2.5% inflation give 1.46% real. The table shows the corpus as a multiple of 12 first-month withdrawals, for withdrawals that rise with inflation and are taken at the start of each month:

Dividing 1 by the multiple gives the first-year withdrawal rate. The 4% rule's multiple of 25 funds 30 years only if the portfolio earns a steady 1.27% above inflation, or 40 years at 2.61%. That is well below what stocks and bonds have averaged, and the gap is deliberate, as the next section explains.

The 4% rule: where it comes from and where it breaks

William Bengen, a financial planner, tested withdrawal rates against actual US returns and inflation for retirements starting in each year from 1926 (Journal of Financial Planning, October 1994, reprinted 2004). His portfolio was half common stocks and half intermediate-term Treasury notes, continually rebalanced, with all assets in tax-deferred accounts. A first-year withdrawal of 3%, raised with inflation each year, never lasted less than 50 years. At 4% no portfolio ran out in under 33 years, while 4.25% could run out in 28.

The paper opens with a fictional planner who expects a 60/40 portfolio to keep earning its historical 8.2% a year, subtracts 3% inflation and lets clients draw the 5% real return. Bengen calls that a fallacy: average returns and average inflation are not a sound basis for a safe withdrawal rate, because a severe market fall combined with high inflation can drain a portfolio first. In his data, people who retired in the late 1960s and early 1970s would have had only about 20 years of income at 5%, after the 1973–74 crash hit during high inflation. This calculator also assumes constant averages, so treat its corpus as a minimum and use a cautious return for the retirement years.

The rule has limits of its own:

• It rests on one country's history, and nothing guarantees future returns will match it.
• It ignores fees and taxes. A 1% yearly fee comes straight off the return, which can move you a full column to the left in the table above.
• It targets 30 years. Someone retiring at 50 who plans to 95 needs 45 years, and at 2% real even 40 years needs 27.7 times spending, a 3.6% first-year rate.

What today's spending will cost later

Inflation compounds exactly like interest. What 1,000 a month of spending today will cost:

Central bank targets give a starting point for the inflation field. The US Federal Reserve, the Bank of England and the European Central Bank target 2%. The Reserve Bank of India targets 4% CPI inflation within a 2% to 6% band, a target the government retained in March 2026 for April 2026 to March 2031. Targets are not forecasts: US consumer prices rose 3.4% in the year to August 2026 (BLS CPI). A plan that holds up at a point or two above target is safer than one built on the target itself.

Monthly saving needed for every 1,000,000

The saving required to build 1,000,000, deposited at the start of each month from zero, at three yearly returns:

Scale by your own gap: a 1,354,195.51 gap over 30 years at 6% needs 1.3542 × 1,021.18 = 1,382.88 a month, the worked example's answer. In this table, starting ten years earlier cuts the monthly amount by 41% to 68%.

Mistakes that distort the plan

• A retirement return copied from the saving years. If you will hold more bonds and cash once withdrawals start, the return during retirement should sit below the return before it.
• Returns quoted before fees. Enter what you expect to keep.
• A planning age set at life expectancy. Life expectancy is an average, so many people live past it. Plan to an age you are unlikely to pass.
• A pension that starts after you retire. UK State Pension age is 66 for people born before 6 April 1960 and rises to 67 between 2026 and 2028. If you stop work before your pension starts, run the plan once with full expenses for the gap years and again with expenses net of the pension from the date it begins.

To turn the monthly saving into a fund investment plan with yearly increases, use the SIP calculator. The inflation calculator converts any figure between today's money and future money, and the savings goal calculator solves for the time needed at a saving you can afford.