How to use the retirement savings gap calculator
- Enter your retirement savings now, your monthly contribution and the years until you retire.
- Enter the expected return per year and the yearly income you want in retirement, in today's dollars. Add any other income such as a pension or benefits.
- Open More options to change the withdrawal rate and the inflation rate. Both are examples.
- Read the nest egg you would need, the projected savings, the gap and the extra monthly saving that closes it.
Formula
Income from savings = (income goal - other income) x (1 + inflation)^years
Nest egg needed = income from savings / withdrawal rate
Projected = savings x (1 + i)^n + deposit x ((1 + i)^n - 1) / i, with i = return / 12 and n = months
Extra monthly saving = gap / (((1 + i)^n - 1) / i)
The extra monthly saving is the gap divided by the future value of one dollar saved each month for the same months. If projected savings pass the target, the page reports a surplus instead.
$120,000 saved, $900 a month, 25 years to go
At a 6% return, $120,000 and $900 a month grow to $1,159,490.94. You want $60,000 a year in today's dollars with $18,000 coming from other sources. With 2.5% inflation the $42,000 gap becomes $77,865.65 in retirement dollars. A 4% withdrawal rate calls for a nest egg of $1,946,641.30.
The shortfall is $787,150.36, and you reach 59.6% of the target. Saving $1,135.87 more each month for 25 years closes it. With a 0% return and no inflation, $50,000 a year at a 5% withdrawal rate needs exactly $1,000,000, and $500 a month for 30 years gives $180,000.
What the withdrawal rate means
A withdrawal rate turns a yearly income goal into a lump sum: at 4%, each dollar of income needs $25 of savings. It is a planning convention, not a rule or a promise that the money will last. A lower rate needs a bigger nest egg and is more cautious. Because the calculation divides by the rate, small changes to it move the result a lot.
Closing a gap
A gap can be closed by saving more, retiring later, spending less in retirement, planning for more other income or accepting more risk, and the page lets you test each by changing a field. Taxes, fees, a change in spending as you age, how long you live and uneven market returns are not modeled, so treat the answer as a direction, not a plan.
To project savings with contribution raises use the Retirement Calculator, to test how long a nest egg lasts use the Retirement Withdrawal Calculator and to see an early-retirement target use the FIRE Calculator.
Assumptions and limits
- Deposits are made at the end of each month and returns compound monthly.
- Income goals and other income are in today's dollars and rise with the inflation rate you enter until you retire.
- The return, inflation and withdrawal rate are assumptions, not forecasts or rules.
- Nothing is uploaded. Calculations run in your browser, and the result is not financial advice.
Frequently asked questions
How much do I need to retire?
It depends on the income you want and the withdrawal rate you accept. Divide the yearly income you need from savings by the withdrawal rate. At 4% that is 25 times the income, but the right rate for you is your own decision.
Why include other income?
A pension or benefit covers part of your spending, so savings only need to supply the rest. Enter it in today's dollars and the page grows it with inflation like the goal.
Is the withdrawal rate a safe rate?
No rate is guaranteed. It is a convention used to size a nest egg. Markets, inflation, taxes and how long you live change what is safe for you.
What does the extra monthly saving assume?
That you start now, deposit it at the end of each month until you retire and earn the same return as your other savings. Starting later requires a larger amount.