How Does the Retirement Calculator Work?

How Future Value Works

The core formula is future value: your current savings grow at your annual return compounded monthly, and your monthly contributions grow as they are added each month. Over 35 years at 7%, a $50,000 starting balance alone grows to about $570,000 before any contributions. Adding $1,000 per month pushes the result past $2,000,000. The formula compounds every month, so early money does the most work.

How the Employer Match Is Added

Each month the calculator adds the smaller of two amounts: your match percentage applied to your contribution, or your match cap applied to your salary divided by 12. On a $100,000 salary with a 6% cap, the maximum monthly match is $500. A 100% match on a $500 monthly contribution hits that $500 cap exactly. The match is added before compounding, so it grows right alongside your own money.

How Inflation Adjusts the Results

The calculator runs its projection at the real rate, which is your nominal return adjusted for inflation. A 7% return with 3% inflation becomes roughly 3.9% real growth. That is why the total at retirement in today's dollars is far lower than the nominal total: the nominal number is what your statement will say, and the today's dollars number is what it will buy. The year by year table is shown entirely in today's dollars to avoid mixing the two.

How the Retirement Years Work

At retirement, contributions and employer matches stop. Each year the calculator applies the 4% rule withdrawal to the starting nest egg, adjusted for inflation, which keeps income constant in today's dollars. Your remaining balance keeps earning the real return while money flows out. The result is the year by year balance through your life expectancy, ending at the remaining amount the calculator reports.

What Assumptions You Are Making

Every retirement projection depends on three assumptions: your return, your inflation rate, and your life expectancy. Returns are not guaranteed, inflation varies year to year, and no one knows how long they will live. The calculator is a planning tool, not a promise. Try several return rates and life expectancies to see how sensitive your plan is, and build in margin on the conservative side.