Key Concepts
- Compound Growth: Your money grows exponentially over time through reinvested returns.
- Inflation Adjustment: We account for rising costs so your retirement income maintains purchasing power.
- The 4% Rule: A common guideline suggesting you can safely withdraw about 4% of your portfolio annually in retirement.
- Savings Gap: The difference between what you need and what you are projected to have.
How Calculations Work
Required Nest Egg = (Desired Annual Retirement Income) ÷ Safe Withdrawal Rate
Projected Savings = Future Value of Current Savings + Future Value of Contributions (with annual increases)
We use the standard Future Value formula with inflation-adjusted contributions and returns.
Important Notes
- This is a simplified model. Real returns vary year to year.
- Social Security and pensions are not included by default (you can mentally adjust the "Required Nest Egg" downward).
- Healthcare costs and long-term care are major retirement expenses not modeled here.
- Consider consulting a financial advisor for personalized planning.