How Retirement Planning Works
Learn the fundamentals of retirement planning, including how much to save, when to start, and how to calculate your retirement needs.
What is Retirement Planning?
Retirement planning is the process of determining retirement income goals and the actions necessary to achieve those goals. It involves estimating expenses, identifying income sources, and creating a savings strategy.
Key Retirement Planning Questions
- How much will I need? Estimate your retirement expenses
- How much will I have? Project your future savings balance
- When can I retire? Calculate your retirement age
- How much should I save? Determine required monthly contributions
The 4% Rule
The "4% rule" suggests you can safely withdraw 4% of your retirement portfolio's initial value each year, adjusted for inflation, without running out of money for 30 years.
Example:
If you have $1,000,000 saved, you can withdraw $40,000/year ($3,333/month) adjusted for inflation.
When to Start Saving
Start as early as possible! The power of compound interest means money saved in your 20s has decades to grow. Starting early is more important than saving large amounts later.
How Much to Save
Common rules of thumb:
- 1x your salary by age 30
- 3x your salary by age 40
- 6x your salary by age 50
- 8-10x your salary by age 60
Retirement Accounts
- 401(k): Employer-sponsored, often with matching contributions
- IRA: Individual retirement account, tax-advantaged
- Roth IRA: Contributions taxed now, withdrawals tax-free in retirement
Plan Your Retirement
Use our Retirement Calculator to estimate your future balance or required savings.
Try the Calculator
Retirement Calculator
Plan your retirement savings and income. Estimate how much you will have and how much you need to retire comfortably.
How to: Select calculation mode - choose "How much will I have?" to project your future balance, or "How much do I need?" to determine required savings
Compound Interest Calculator
Calculate how your investment grows over time with compound interest. See the final amount, total contributions, and interest earned.
How to: Define your initial investment amount - the starting balance you invest today
Investment Calculator
Estimate how your investments grow over time with compound returns. Calculate profit, total contributions, and long-term value.
How to: Enter your initial investment - the starting amount you invest today (can be $0)