Retirement Calculator

What is Retirement?

Retirement is the point at which a person stops working for pay, permanently or mostly, and starts living on savings, pensions and benefits instead of a paycheck.

Why Retire?

For most of history, people worked as long as their health allowed. Formal retirement is a modern idea, made possible by public pensions such as Germany's old-age insurance in the 1880s and the US Social Security Act of 1935, and by employer pension plans that spread in the twentieth century. As life expectancy rose, retirement turned from a brief final chapter into a stage that can last twenty or thirty years.

People retire for many reasons. Some are ready to trade a schedule for travel, family, volunteering or hobbies. Others leave because physical or mental demands become harder to meet, because of health problems, or because of layoffs and age-related bias that make job hunting difficult later in life. Some employers and occupations, such as airline pilots and some public safety jobs, set mandatory retirement ages.

Retirement does not have to be all or nothing. Phased retirement, part-time consulting and seasonal work let people ease out of the workforce while keeping some income and social contact. Working even a few extra years can make a large difference to finances: it adds savings, shortens the period the savings must cover and, for Social Security, raises the monthly benefit for each year claiming is delayed up to age 70.

Whatever the reason and timing, the financial question is the same: will the money last? That depends on how much is saved, how it is invested, how long retirement runs and how much is spent each year, which is what the calculators on this page help estimate.

How Much to Save for Retirement

There is no single right number, because retirement spending depends on lifestyle, health, housing and where you live. Planners use a few rules of thumb as starting points. They are useful for a quick check, but a personalized estimate like the calculator above, built on your own income and timeline, is more reliable.

10% Rule

The 10% rule says to save at least a tenth of your pre-tax income for retirement throughout your working life. Starting in your twenties makes 10% to 15% enough for many people; starting later usually requires a higher rate. Employer matching contributions count toward the total.

80% Rule

The 80% rule estimates that you will need about 70% to 80% of your final pre-retirement income each year to keep a similar standard of living. Some costs drop once you stop working: payroll taxes, commuting, work clothing and retirement saving itself. Others, especially health care, tend to rise. Someone with a paid-off home may need less than 70%, while someone planning to travel extensively may need close to 100%. The calculator's default of 75% sits in the middle of the usual range.

4% Rule

The 4% rule comes from studies of historical US stock and bond returns in the 1990s. It suggests that a retiree who withdraws 4% of the portfolio in the first year, then raises the dollar amount with inflation each year, would historically have avoided running out of money over a 30-year retirement in most periods. Turned around, it implies a savings target of about 25 times your first-year spending from the portfolio. Spending $40,000 a year from savings would need about $1 million.

The rule is a guide, not a guarantee. It assumes a balanced portfolio, a 30-year horizon and no change in spending, and future returns may be lower than the historical record. Longer retirements, high fees or a market crash early in retirement argue for a lower starting rate.

Impact of Inflation on Retirement Savings

Inflation is easy to overlook because it works slowly. At 3% a year, prices roughly double every 24 years, so a retiree who needs $50,000 in the first year needs about $90,000 to buy the same things 20 years later. A fixed annuity or pension without cost-of-living adjustments loses about half its buying power over that period.

That is why this calculator inflates your income needs to the year you retire and keeps raising them during retirement. It is also why retirees usually keep part of their savings in stocks, which have historically outpaced inflation over long periods, rather than holding everything in cash or fixed-rate bonds. Treasury Inflation-Protected Securities (TIPS), I bonds and Social Security, which adjusts its payments each year for inflation, help protect the essential part of a budget.

Common Sources of Retirement Funds

Most retirees draw on several sources at once. The main ones in the US are described below.

Social Security

Social Security is the foundation of retirement income for most Americans. Workers earn credits by paying payroll tax, and 40 credits, usually about ten years of work, qualify them for retirement benefits. The monthly benefit is based on the highest 35 years of earnings, adjusted for wage growth.

You can claim as early as 62 or as late as 70. Claiming before full retirement age, which is 67 for anyone born in 1960 or later, permanently reduces the benefit by up to 30%; waiting past it adds delayed retirement credits of 8% a year until 70. Benefits are adjusted each year for inflation, and the 2026 cost-of-living adjustment was 2.8%. Spouses, divorced spouses, widows and widowers may also be entitled to benefits based on a worker's record. Social Security was designed to replace roughly 40% of an average earner's pre-retirement income, so most people need savings as well. Your personal estimate is available through a my Social Security account at ssa.gov.

Pensions, 401(k)s, Individual Retirement Accounts (IRA), and Other Savings Plans

Employer plans fall into two families. A defined-benefit plan, the traditional pension, promises a set monthly income in retirement, usually based on salary and years of service, and the employer bears the investment risk. These plans are now found mostly in government jobs, unionized industries and some large companies. A defined-contribution plan, such as a 401(k), 403(b) or the federal Thrift Savings Plan, promises nothing about the outcome: the employee and often the employer put money in, the employee chooses the investments, and the balance at retirement depends on contributions and returns.

A 401(k) lets employees contribute part of each paycheck before income tax, up to $24,500 in 2026, with an extra catch-up contribution of $8,000 for those 50 and older and a higher catch-up for ages 60 to 63. Many employers match part of what employees put in, for example 50 cents per dollar on the first 6% of pay, which is an immediate return that is hard to beat. Most plans now also offer a Roth option, funded with after-tax money that comes out tax-free in retirement. 403(b) plans serve schools, hospitals and nonprofits, and 457(b) plans serve state and local government workers, with similar limits.

Individual retirement accounts are available to anyone with earned income, whether or not an employer plan exists. The 2026 limit is $7,500, plus $1,100 for those 50 and older. Contributions to a traditional IRA may be deductible, depending on income and whether you or your spouse are covered by a workplace plan, and withdrawals are taxed as income. Roth IRA contributions are not deductible, but qualified withdrawals, including all the growth, are tax-free, and Roth IRAs have no required distributions during the owner's life. Direct Roth contributions phase out at higher incomes.

Self-employed people and small businesses have their own options. A SEP IRA lets an employer contribute up to 25% of compensation, subject to an annual dollar cap. A SIMPLE IRA allows employee deferrals with a required employer contribution and suits businesses with up to 100 employees. A solo 401(k) lets a business owner with no employees other than a spouse contribute both as employee and as employer.

Tax-deferred accounts have rules about taking money out. Withdrawals before 59½ generally trigger a 10% additional tax on top of income tax, with exceptions for disability, certain medical costs, separation from service in or after the year you turn 55 for 401(k)s, and a few others. Required minimum distributions from traditional accounts start at age 73 for people born from 1951 to 1959 and at 75 for those born in 1960 or later.

Health savings accounts, paired with high-deductible health plans, are another useful tool. Contributions are deductible, growth is tax-free, and withdrawals for qualified medical expenses are tax-free at any age; after 65, non-medical withdrawals are simply taxed like a traditional IRA. Because health care is one of the largest retirement costs, an HSA can work as a medical retirement account.

Other Sources of Retirement Income

Taxable brokerage accounts have no contribution limits or withdrawal rules. They lack the tax breaks of retirement accounts, but long-term capital gains and qualified dividends are taxed at lower rates than wages, and the flexibility is valuable for retiring before 59½ or for large one-time expenses.

Annuities, sold by insurance companies, convert a lump sum into guaranteed income. An immediate annuity starts paying right away for life, much like a private pension, and protects against outliving savings. Deferred, variable and indexed annuities are more complex and often carry high fees and surrender charges, so read the contract carefully.

Home equity is often the largest asset older households own. Selling and moving somewhere smaller or cheaper can free up cash, and homeowners 62 and older can use a reverse mortgage, such as the FHA-insured Home Equity Conversion Mortgage, to draw on equity without monthly payments, though fees are high and the loan grows over time.

Rental property can provide steady income and a hedge against inflation, at the cost of management work, vacancies and repairs. Dividend-paying stocks and bond ladders can produce predictable cash flow without selling assets.

Finally, many retirees continue some paid work. Consulting, part-time jobs and small businesses add income, keep people active and allow savings to stay invested longer. Earnings before full retirement age can temporarily reduce Social Security benefits, but the withheld amounts are credited back after full retirement age.

Frequently asked questions

Sources

• Social Security Administration – Retirement Benefits
• IRS – Retirement Plans
• Investor.gov – U.S. Securities and Exchange Commission