Retirement Investment Calculator
Project your future wealth and estimate your retirement nest egg.
Your Retirement Projection
How Your Retirement Investment Grows
Planning for retirement is one of the most critical financial tasks an individual can undertake. Using a retirement investment calculator allows you to visualize how small, consistent contributions combined with the power of compound interest can lead to significant wealth over time.
The Power of Compounding
Compound interest is often called the "eighth wonder of the world." Unlike simple interest, where you only earn on your principal, compounding means you earn interest on your interest. In the context of a retirement fund, your annual returns are reinvested, leading to exponential growth in the final decade before your target retirement age.
Key Variables Explained
- Current Age vs. Retirement Age: This determines your "time horizon." The longer the duration, the more time your investments have to recover from market volatility and benefit from compounding.
- Monthly Contributions: Regular deposits (often through a 401k or IRA) are the engine of your retirement plan. Even modest amounts like $200 a month can result in hundreds of thousands of dollars over 30 years.
- Annual Return: Historically, the S&P 500 has averaged around 7-10% annually. However, depending on your risk tolerance and asset allocation (stocks vs. bonds), this number will vary.
- Inflation: This is the silent killer of purchasing power. A $1 million nest egg in 30 years will not buy as much as $1 million does today. Our calculator provides an inflation-adjusted figure to help you understand the actual lifestyle your savings will support.
Practical Example
Imagine a 25-year-old starting with $5,000 in a Roth IRA. If they contribute $400 every month and earn an average 8% annual return, by age 65, their account could grow to approximately $1,385,000. If they wait until age 35 to start the same plan, they would only have $600,000. That 10-year delay costs them over $700,000 in potential growth!
Pro Tip: The 4% Rule
Most financial planners suggest you can safely withdraw 4% of your total retirement balance annually without running out of money. Our calculator uses this rule to estimate your potential monthly income in retirement.