Retirement Number Calculator: How to Use It

What this calculator does

The Retirement Number Calculator figures out how large your investment portfolio needs to be at retirement to fund your lifestyle without running out of money. It starts with your annual spending goal, subtracts your guaranteed income (pension and Social Security), and applies the 4% rule to the remaining gap to produce the required portfolio target.

It then projects your current savings forward to retirement using the growth rate you specify, calculates the gap between your projected balance and your required balance, and shows the monthly savings needed to close that gap. If you're already on track, it tells you that too.

What each input means

Annual spending in retirement

How much you expect to spend per year in retirement, in today's dollars. Include housing costs, healthcare, food, travel, and any other recurring expenses. Most people find retirement spending runs 70 to 90% of pre-retirement spending in the first decade, then drops as travel and activity slow, then rises again if healthcare costs increase significantly in later years. If you're not sure, 80% of your current gross income is the standard starting assumption.

The calculator inflates this figure forward to your retirement date, so the target it produces is in future dollars at your retirement. Don't pre-inflate it yourself.

Monthly pension income

Your expected monthly pension at retirement, gross before taxes. If you have multiple pensions (a state teacher pension plus a partial private pension, or FERS plus a separate military pension), add the monthly amounts together. Each $1,000/month entered reduces your required portfolio by $300,000 under the 4% rule. The impact is immediate and visible in the output.

Monthly Social Security benefit

Your expected monthly Social Security at the age you plan to claim. Find this at ssa.gov/myaccount. The statement shows your estimated benefit at 62, at your full retirement age (67 for anyone born 1960 or later), and at 70. Enter the figure for your planned claiming age. If you're 15 years from retirement, the estimate will shift as your earnings history builds, but it's a reasonable planning figure now.

Current savings and monthly contribution

Total across all your retirement accounts: 401(k), 403(b), TSP, IRA, Roth IRA. The calculator projects this balance forward to retirement at the growth rate you specify. Monthly contribution is what you add each month going forward, which compounds over the years remaining.

Expected investment return

The annual nominal return you expect on your portfolio before inflation. Historical average for a 60/40 stock-bond mix is roughly 7 to 8% nominal. For a more aggressive 80/20 equity allocation, 8 to 9% is historically defensible over long periods. For conservative investors or those close to retirement, 5 to 6% is more appropriate. The calculator runs the base case at your chosen rate and shows the number at 1% above and below for sensitivity.

How the 4% rule works and where it comes from

William Bengen was a financial planner who got tired of guessing. In 1994, he pulled 75 years of stock and bond market data and ran every possible 30-year retirement starting from 1926. His question: what withdrawal rate never failed? The answer was 4.15%, which he rounded to 4%.

The inverse is the 25x multiple. Need $40,000 from your portfolio each year? You need $1,000,000. Need only $15,000 because your pension and Social Security cover the rest? You need $375,000. The formula scales directly with the income gap, which is why guaranteed income has such a large effect on the number.

Bengen later updated his research to suggest 4.5% is defensible with a better asset allocation. Most financial planners still use 4% because it has the most historical evidence behind it and gives a margin of safety. For retirements starting before age 60 or expected to last 35 years or more, 3.5% (28.6x) or 3% (33x) is more appropriate. The calculator shows all three multiples in the output so you can see the range.

Why guaranteed income matters so much

Every $1,000/month of pension income reduces your required portfolio by $300,000. That arithmetic works because the pension replaces portfolio withdrawals dollar for dollar, so you need 25 times less portfolio for each dollar of pension income.

A federal employee with a $2,800/month FERS pension effectively walks in with a phantom $840,000 in guaranteed income behind them. It doesn't sit in any account. It doesn't appear on any statement. But it covers $33,600 per year in spending without touching a single investment. Add $2,000/month in Social Security ($24,000/year, worth another $600,000 in portfolio terms) and that retiree already has income equivalent to a $1,440,000 portfolio, before counting their TSP.

This is why comparing federal employees to private-sector workers purely on TSP balance misses the point. The pension is the dominant asset; the TSP provides flexibility on top of it.

Sequence of returns and why pensions help there too

The average return of a portfolio over 30 years matters. The sequence of those returns in the first 5 to 7 years of retirement matters more.

Retire in 2000 with $1,000,000 and withdraw 4% annually. The 2000 to 2002 bear market draws down your balance while you keep withdrawing. By the time markets recover in 2003, you're pulling from a permanently smaller base. A Vanguard analysis found that the difference between retiring in a strong market versus a weak one produces up to a 50% difference in terminal portfolio value over 30 years, even with identical average annual returns.

Your pension covers the worst of this. The pension check in year one of a market crash is identical to year one of a bull run. Every dollar it covers is a dollar your portfolio doesn't need to provide during the most vulnerable years. That translates directly to a lower retirement number because you can afford to hold a more aggressive portfolio without panicking.

Inflation adjustment: why the number looks bigger than expected

The retirement number output is in future dollars. If you're 15 years from retirement and inflation runs at 3% annually, $80,000 in today's spending becomes about $124,600 at retirement. That inflated figure is what the 25x multiple applies to, which is why the target sometimes surprises people.

Your portfolio also grows in nominal terms, so this is internally consistent. The real (inflation-adjusted) return is what determines whether you'll actually meet the target. If your portfolio grows at 7% nominal and inflation runs 3%, your real return is roughly 4%, which is what actually matters for closing the gap.