Why Starting Early Is a Big Deal
Let's put two people side by side. Person A starts investing $400/month at age 25 and stops at 35 — just 10 years of contributions, total $48,000. Person B starts at 35 and invests $400/month until 65 — 30 years, total $144,000. Both earn 7% annual returns.
At 65, Person A has roughly $1.1 million. Person B has about $540,000.
Person A contributed a third as much money and ended up with twice as much. That's compound interest flexing. The money you invest in your 20s and 30s does the heavy lifting for the rest of your life. Every year you delay is expensive.
How the Math Actually Works
The calculator uses the future value of an annuity formula. It handles two pieces at once: your existing savings growing, plus your new monthly contributions piling on top. Here's the formula:
FV = PV × (1 + r)^n + PMT × [((1 + r)^n - 1) / r]Where PV is your current savings, r is the monthly return rate (annual rate divided by 12), n is the number of months until retirement, and PMT is your monthly contribution. The first part covers what your existing money grows into. The second part covers what your ongoing contributions accumulate to.
For the "how long will it last" calculation, the calculator runs a month-by-month simulation: each month your balance earns returns, then you withdraw your planned amount. It counts how many months until the balance hits zero.
401(k) vs. IRA: Where to Put Your Money First
Both are tax-advantaged retirement accounts, but they have different rules and limits. Most people should fund both, but there's a clear priority order:
| Feature | 401(k) | IRA |
|---|---|---|
| 2024 Contribution Limit | $23,000 | $7,000 |
| Catch-Up (50+) | $7,500 extra | $1,000 extra |
| Employer Match | Often available | No |
| Investment Choices | Limited to plan menu | Anything at any broker |
| Income Limits | None | Yes (for deductible contributions) |
The standard advice: contribute enough to your 401(k) to get the full employer match (it's free money — literally the best return you'll ever get). After that, max out an IRA if you can, because you'll have way more investment options and probably lower fees. Then go back to the 401(k) if you still have room.
Inflation: The Stealth Tax on Your Retirement
At 3% inflation, prices double roughly every 24 years. So $4,000/month in living expenses today becomes $8,000/month in 2050. If you retire with a nest egg that looks comfortable in nominal dollars but ignores inflation, you're in for a rude surprise.
This calculator shows your retirement balance in both nominal terms and "today's dollars" (inflation-adjusted). The inflation-adjusted number is the one that actually matters for planning. If the "today's dollars" figure looks too small, you need to either save more, retire later, or plan to spend less.
Am I On Track? Age-Based Benchmarks
Fidelity publishes widely-cited savings targets based on your salary. These are rough guidelines, not gospel, but they give you a sense of whether you're ahead or behind:
- By 30: 1x your annual salary
- By 35: 2x your salary
- By 40: 3x your salary
- By 45: 4x your salary
- By 50: 6x your salary
- By 55: 7x your salary
- By 60: 8x your salary
- By 67: 10x your salary
Behind? Don't panic, but do take it seriously. You can catch up by increasing contributions (the 50+ catch-up limit lets you stuff an extra $7,500 into your 401(k) and $1,000 into an IRA), delaying retirement by even 2-3 years, or adjusting your expected retirement lifestyle.
Common Questions
What return rate should I actually use?
The S&P 500 has averaged about 10% per year over the long haul (before inflation). After inflation, that's roughly 7%. If you're mostly in stocks, 7% is a reasonable assumption. A 60/40 stock-bond mix? Maybe 5-6%. All bonds? 3-4%. Don't use 10% for planning — that's before inflation eats a chunk of it.
I'm 45 with almost nothing saved. Is it too late?
It's not ideal, but it's not hopeless either. You've got 20 years, which is still a meaningful time horizon for compound growth. You'll need to save aggressively — aim for 20-25% of your income — and consider working until 70 to maximize Social Security benefits. You may also need to plan for a more modest retirement lifestyle than someone who started at 25. Every dollar you save now still counts.
Does this account for Social Security?
No. Social Security is a separate income stream that depends on your 35 highest-earning years and when you claim (62, 65, or 70). The average monthly benefit is around $1,900, but it ranges from under $1,000 to over $4,800. Treat it as a supplement to your savings, not a replacement. You can estimate your benefit at ssa.gov.
Related Calculators
- Compound Interest Calculator — Detailed savings growth projections
- Salary Calculator — Plan how much to save from each paycheck
- Savings Calculator — Track savings goals with contributions
- Inflation Calculator — See how inflation erodes purchasing power
This calculator provides estimates for educational purposes only. Actual returns will vary. Consult a financial advisor for personalized retirement planning.