Formulas & Methodology

1. Compound Growth

Each account balance grows annually at the growth rate you specify. The formula applied each year of the simulation is:

For example, a 401(k) with a $150,000 balance and a 6% growth rate would be worth $150,000 × 1.06 = $159,000 after one year, before any contributions or withdrawals.

Each account type (401k, IRA, Roth IRA, HSA, brokerage, real estate, bonds, etc.) uses its own individual growth rate, which you control via the slider next to each input field.

2. Pre-Retirement Contributions

During the accumulation phase (from your current age until retirement), the calculator assumes you save 15% of your annual salary each year. This contribution is distributed proportionally across your existing accounts based on their current balances.

Contributions are added after growth is applied each year. Once you reach retirement age, contributions stop and withdrawals begin.

3. Inflation Adjustments

All income sources and expenses are adjusted annually for a fixed 3% inflation rate. This applies to both pre-retirement and retirement years.

This means that $1,000/month in housing costs today would cost approximately $1,344/month in 10 years and $1,806/month in 20 years. The same inflation factor is applied to your income sources (Social Security, pension, rental income, dividends, part-time work).

4. Income vs. Expenses

Your monthly income and expense inputs are annualized (multiplied by 12) for the simulation. The net cash flow determines whether you have a surplus or a shortfall each year.

If the shortfall is positive (expenses exceed income), the calculator withdraws from your savings accounts to cover the gap. If income exceeds expenses, no withdrawals are needed that year.

5. Social Security Benefits

Your Social Security benefit is adjusted based on the age you begin claiming. The full retirement age (FRA) is 67. Claiming earlier reduces your benefit; delaying increases it.

If your retirement age is below 62, Social Security income is set to $0 (you cannot claim before 62). If your retirement age is above 70, the maximum factor of 1.24 is used, since benefits do not increase further after 70.

6. Withdrawal Order

When your expenses exceed your income in a given year, the calculator withdraws from your accounts in a tax-efficient order:

1. Roth IRA— Tax-free withdrawals. Used first to avoid adding to your taxable income.
2. Savings Account— Taxable, but typically lower-growth liquid funds.
3. HSA— Tax-free when used for qualified medical expenses.
4. Other Savings— Taxable withdrawals from miscellaneous savings.
5. Taxable Investment Accounts— Brokerage, real estate, CDs, bonds, commodities, cryptocurrency, and other investments, in that order.
6. 401(k) and IRA— Last resort. These are fully taxable and the calculator adds an extra withdrawal to cover the estimated tax liability. The withdrawal is split between 401(k) and IRA proportionally to their balances.

7. Required Minimum Distributions (RMDs)

Starting at age 73 (per the SECURE 2.0 Act), you must withdraw a minimum amount each year from your traditional 401(k) and IRA accounts. The RMD is calculated using the IRS Uniform Lifetime Table:

The IRS factor decreases with age, meaning you must withdraw a larger percentage each year. Selected values from the table:

RMD withdrawals are always treated as taxable income. They are withdrawn from your 401(k) first, then IRA if the 401(k) balance is insufficient. Roth IRAs are exempt from RMDs.

8. Federal Income Tax

Taxes are calculated using 2024 federal income tax brackets for single filers with progressive marginal rates. A standard deduction of $14,600 is applied before calculating tax.

Tax is calculated progressively: only the income within each bracket is taxed at that rate. For example, if your taxable income is $60,000, you pay 10% on the first $11,600, 12% on the next $35,550, and 22% on the remaining $12,850.

The effective tax rate shown in the gauge chart is your total tax divided by your total taxable income:

Note: State taxes are not included in the current calculation. Only federal income tax is modeled.

9. Savings Longevity

The simulation runs year by year from your current age through your life expectancy. Each year, the following steps are performed in order:

1. Apply 3% inflation to all income and expense values
2. Apply individual growth rates to each account balance
3. Add annual contributions (pre-retirement years only)
4. Calculate retirement income with Social Security adjustment
5. Calculate RMD if age ≥ 73
6. Determine shortfall (expenses − income)
7. Withdraw from accounts in tax-efficient order to cover shortfall
8. Calculate federal taxes on taxable withdrawals
9. Record total savings balance after all withdrawals

If your savings last through your entire life expectancy, the “Savings Longevity” equals your total years in retirement. If savings are depleted earlier, the simulation stops at the depletion year.

10. Future Savings Projection

The “Projected Savings at Retirement” metric uses a weighted average growth rate across all your investment accounts and compounds your total savings with monthly contributions:

This gives you a single projected number for how much your combined savings could be worth by the time you retire, assuming consistent contributions and the growth rates you specified.