Plan your retirement savings and estimate your future income.
Total Contributions & Growth
Compound growth is the process where your investment returns generate their own returns over time, creating exponential growth.
For retirement planning, this means that starting early—even with smaller amounts—can be more valuable than starting later with larger contributions.
For example, someone who invests $5,000 annually from age 25 to 35 (10 years, $50,000 total) and then stops can end up with more money at age 65 than someone who invests $5,000 annually from age 35 to 65 (30 years, $150,000 total), assuming the same rate of return.
The 4% Rule is a guideline for sustainable retirement withdrawals, suggesting you can safely withdraw 4% of your initial retirement balance in the first year, then adjust that amount for inflation each subsequent year.
This rule aims to provide a high probability that your savings will last 30+ years through various market conditions.
Using this rule of thumb, you can estimate how much you need to save:
Retirement Savings Need = Annual Expenses × 25
For example, if you need $60,000 annually in retirement, you would need approximately $1.5 million in retirement savings (60,000 × 25).
Tax-advantaged accounts offer special tax treatment that can significantly enhance your retirement savings.
Maximizing these accounts should generally be prioritized over taxable investments for retirement planning.
One of the most critical factors in building retirement wealth is time. Here's how a 10-year head start can make a dramatic difference:
| Investor | Investment Period | Monthly Amount | Total Invested | Value at 65 |
|---|---|---|---|---|
| Early Start | Age 25-65 (40 years) | $300 | $144,000 | $777,172 |
| Late Start | Age 35-65 (30 years) | $500 | $180,000 | $566,416 |
*Assuming 8% annual return compounded monthly
This demonstrates why financial experts consistently emphasize that the best time to start saving for retirement is always "now," regardless of age.
Elena, a software developer, started serious retirement planning at 28. She prioritizes her 401(k) up to the employer match, then maxes out her Roth IRA, taking advantage of tax-free growth during her peak earning years.
Robert realized at 45 that his retirement savings were insufficient. After paying off high-interest debt, he maximized his 401(k) contributions including catch-up contributions after age 50, and established a SEP IRA for his side business income.
The Wongs are focusing on their final years before retirement. They've gradually shifted their portfolio to more conservative investments to protect against market downturns as retirement approaches while maintaining some growth exposure.
While there's no one-size-fits-all answer, there are several methods to estimate your retirement needs:
Important factors that affect your number:
For a more personalized estimate, consider working with a financial advisor who can account for your specific situation and goals.
Effective retirement investment strategies typically vary based on your age and risk tolerance:
| Life Stage | Typical Allocation | Focus |
|---|---|---|
| Early Career (20s-30s) |
80-90% stocks 10-20% bonds |
Growth; can tolerate volatility due to long time horizon |
| Mid-Career (40s-50s) |
60-70% stocks 30-40% bonds |
Balanced growth and stability; moderate risk |
| Near Retirement (55-65) |
40-60% stocks 40-60% bonds |
Capital preservation with some growth; lower risk |
| In Retirement (65+) |
30-50% stocks 50-70% bonds/cash |
Income generation and capital preservation |
Important note: These are general guidelines. Your individual strategy should consider your specific circumstances, including:
If you're getting a late start with retirement savings, don't panic. You still have options to improve your retirement outlook:
Example impact: A 55-year-old with $100,000 saved who increases monthly contributions from $500 to $1,500, delays retirement from 65 to 68, and works part-time for 5 years in retirement could potentially double or triple their effective retirement resources compared to their original trajectory.
Remember that even small improvements are meaningful. Focus on what you can control, and consider working with a financial advisor to develop a personalized catch-up strategy.
Inflation is one of the biggest threats to retirement security because it gradually reduces your purchasing power over time.
Impact Example: At just 3% annual inflation, the purchasing power of $1,000 will decrease to approximately $554 after 20 years and to $412 after 30 years—meaning you'll need more than twice as much money to buy the same goods and services after 30 years.
When using the retirement calculator, a good practice is to reduce your expected rate of return by 2-3% to account for average long-term inflation, giving you a more realistic picture of your future purchasing power.
The choice between Traditional and Roth accounts depends on your current tax situation, expected future tax situation, and other factors:
| Feature | Traditional 401(k)/IRA | Roth 401(k)/IRA |
|---|---|---|
| Tax Treatment (Contributions) | Tax-deductible now | Taxed now (after-tax contributions) |
| Tax Treatment (Withdrawals) | Taxed as ordinary income | Tax-free (if qualified) |
| Required Minimum Distributions | Yes, starting at age 73 | Yes for Roth 401(k), No for Roth IRA |
| Income Limitations | IRA deduction may be limited based on income | Direct Roth IRA contributions have income limits |
Consider tax diversification: Many financial advisors recommend having both traditional and Roth accounts to provide tax flexibility in retirement. This allows you to strategically withdraw from different accounts based on your tax situation each year.
For specific guidance based on your personal situation, consult with a tax professional or financial advisor.