How this number is made
This projection compounds what you have and what you add until a retirement age, then multiplies the ending balance by a withdrawal rate. Four percent is a research starting point from historical portfolios, not a guarantee that your mix will support that spending.
- Use the age you would stop contributing, not a birthday you hope feels early.
- Contributions should be an amount you can automate. A number you will not send does not belong in the model.
- Read the monthly withdrawal as year-one spending in today’s-style dollars only if your return was already an after-inflation guess.
Formula
Ending balance uses the same future-value formula as the compound-interest page. Year-one withdrawal = ending balance × withdrawal rate.
Worked example
Forty thousand dollars plus $500 a month from 35 to 65 at 6% is a six-figure balance well into the hundreds of thousands. Four percent of that balance is the first year’s sketch. Inflation between now and then is not removed unless you typed a real (after-inflation) return.
Questions
Is 4% safe?
The classic studies looked at diversified portfolios over 30-year retirements in US history. A longer retirement, high fees, or a portfolio of only cash can make 4% too high. This page will not tell you that you are safe.
Where is the employer match?
Include it inside the monthly contribution if you want it in the result. The form has one contribution field on purpose.